If you’ve stopped paying your federal student loans, the government can administratively garnish up to 15% of your wages without having to sue you. There are three ways to stop an administrative wage garnishment for federal student loans.
If anyone has a choice, you should always opt to fund your education through federal loans rather than private loans. While the Department of Education does have the super power collection ability to garnish your wages without having to sue you, they offer a large number of payment plan options that private lenders are not required to offer such as Income-Based Repayment and Pay As You Earn.
In order to begin garnishing your wages, the Department of Education or guaranty agency must provide you with notice of the garnishment and an opportunity for a hearing.
Stop the Wage Garnishment
There are three ways to stop the federal government from completing this administrative wage garnishment:
- The government cannot garnish your wages if you request a hearing within 30 days of the receipt of the notice. If you have a Federal Family Education Loan, the the limit will be 15 days. If you request a hearing after that deadline, the garnishment will typically commence, but if you win at the hearing, it will stop. You can take a look at a request for hearing here. A word of warning. This is just a sample form. You should contact your student loan servicer for a copy of the appropriate form. You can also just request a hearing through your own letter.
- Negotiate a voluntary repayment plan with your student loan servicer. You’d be surprised how often they will actually do this, so I always encourage people to give this a shot if you can afford it.
- File bankruptcy. As long as your bankruptcy case is open and the automatic stay is still in place, the government is stayed from collection activities against you, including garnishment of wages. This is despite the fact that student loans are generally not able to be wiped out in bankruptcy. One of the principal purposes of a bankruptcy is to give you some breathing room to get your financial affairs in order, so even collection activities on non-dischargeable debts are stayed for the duration of the bankruptcy.
Defenses to Federal Loan Wage Garnishment
The most common defense is that the garnishment will cause you and your family a financial hardship. Of course, if you are claiming this defense, you’re going to have to provide a lot of financials to your lender. Other common defenses are:
- You were involuntarily terminated from last employment and have been employed in current job for less than 12 months;
- You have repaid the loan;
- It is not your loan or there is some other reason why you do not owe the money;
- You have already entered into a voluntary repayment plan agreement and are current on your payments;
- You have filed for bankruptcy and the case is still open or the loan was discharged in bankruptcy;
- The school failed to pay you an owed refund;
- The borrower is dead or totally and permanently disabled;
- The loan is not enforceable, for example because of fraud or forgery (very hard and expensive to prove);
- You are eligible for a closed school or false certification discharge.