How to Stop Student Loan Wage Garnishment

Jowanna Daily
Expert Contributor
Last Updated:
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It’s common for students who can’t afford tuition costs out of pocket to take out either federal or private student loans. Just like any loan, it can be easy to fall behind. When this happens, student loan wage garnishment can happen faster than you may realize. Perhaps you’re already in this situation.

True, most colleges and universities require you to learn more about student loan responsibilities before you can get your first loan disbursement; they may even go so far as to explain your deferment options and when you’re expected to repay the loan. Despite these precautions, many graduates find themselves coming up short when it comes time to budget student loan payments.

Student loan defaults can have a ripple effect. Not only is student loan wage garnishment possible, but it can lead to the creditor levying your bank account, the government withholding your tax refunds, and a reduction in your social security benefits. Worst of all, it can affect people like your parents if they co-signed or took loans out on your behalf. If you know you’re facing financial issues, you have a variety of options. The later you wait to deal with your financial hardship, the fewer options you have and the harder it is to turn it all around.

Warning Signs that You May Default on Your Student Loans

Your road to defaulting is not always visible. You may just think you’ve hit a bump along the way and that you’ll get everything back on track. Here are some questions to ask yourself:

How to Stop Student Loan Wage Garnishment
  • Do you have emergency savings in the event your budget takes an unexpected hit?
  • Are you making on-time payments, but you’re paying later with each passing month?
  • Do you notice that you’re incurring late charges on your student loan debt?
  • Is your co-signer having financial difficulty?
  • Do you have any contingency money set aside to pay your bills should you lose your job or become ill?

Consequences You Face When You Default on Your Student Loan

Defaulting on your student loan has a snowball effect. Here is a list of consequences you face:

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  • It limits your repayment options.
  • You lose eligibility for student loan assistance.
  • Your loan amount increases with late fees and collection charges.
  • It ruins your credit history, which affects your ability to get financing for things such as a mortgage or a car loan.
  • It can cause a ripple effect on your finances, causing you to default on other debts.

Timeline of Student Loan Default and Wage Garnishment

Defaulting on your student loan is serious business. The penalties are harsh and long-lasting. If you have federal student loans, the government provides flexible repayment options. You have alternatives to either delay payments or pay lower amounts, but the timeline to wage garnishment condenses with every late payment:

  • 15 to 30 Days Past Due. Your student loan payment is assessed a late fee up to 6% of the total due. If you missed your payment because you overlooked it or forgot about it, pay it immediately. If you are unable to make the payment, call your loan provider to find out what alternative options you have at this point.
  • 31 to 90 Days Past Due. At this point, you past due payments are not only resulting in fees, but it is also affecting your credit. Your loan provider will report the delinquent payments to the credit bureaus. The lender will contact you via emails, mail, and phone. It also starts takes an embarrassing turn — they will call your co-signer and references to try to locate you.
  • 91 to 240 Days Past Due. The late fees continue to mount. At this point the overdue payments start affecting your ability to get credit and, even if you can get credit, you will pay a much higher interest rate. Do not ignore the calls.
  • 241 to 269 Days Past Due. Your time to do something is running out. At this point, the lender will ask you to pay the entire loan in full. The late fees continue to mount, and your credit is taking a hit every 30 days to the credit agencies.
  • 270+ Past Due. Your student loan lender will demand payment in full. Collection costs amount to as much as 40% of the loan, and the late fees are part of your principal balance. Your loan service provider can garnish your wages. If you financed your education through the federal government, they do not need a judgment to garnish your wages or take your property. The federal government can even divert your tax refund and up to 15% of your Social Security to collect payment. Moreover, you lose eligibility to receive federal financial aid.

While you may feel overwhelmed, intimidated, and stuck, don’t ignore the notices. Talk to our lenders to see what options you have. Evaluate all your available options and start working with your lender to find a resolution.

How to Avoid Defaulting on Your Loan

Fortunately, the road to student loan wage garnishment is filled with opportunities to make better choices and avoid it all together. The best approach is a proactive one.

  • Pay on time. Paying timely on your student loan is not only responsible, but it also improves your credit. Account for all your loans. It is easy to overlook a loan if you have multiple loans.
  • Report any address changes immediately to avoid missing payments or getting a notice that your loans are due.
  • Facing finance problems right out of school is common. You can ask for an income-driven repayment plan to reduce your payments temporarily until you are in a better financial space. An income-driven repayment plan will reduce your payments based on your disposable income.
  • Get a deferment or forbearance. If you are facing financial difficulties, it is better to either defer your loan or ask for a forbearance. Whether you lost your job or suffered a medical emergency, sometimes you can’t avoid unfortunate circumstances. You can, though, protect your loan status. While you still accrue interest on your loan, it is a better alternative than defaulting, which is much more expensive.

How to Stop Student Loan Wage Garnishment

If you are at the point where you are facing student loan wage garnishment, or even if it has already started, not all hope is lost. You can do one of the following:

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  • Consolidate your loan. If you owe multiple federal loans, you can combine them using a direct consolidation loan option.
  • Loan rehabilitation . You can also sign a loan rehabilitation program. You must make nine monthly periods within ten consecutive months. Your payments will be 15% of your disposable income and can be as little as five dollars a month.
  • Paying your loan in full. You may want to dip into your savings or ask a relative for help paying off your debt. Staying in default can ruin your credit and cause other consequences. While this may not be your ideal option, if you can pay off your debt, it will save your credit.

Even though your options are limited when you have an impending student loan wage garnishment, the options above are your only alternatives if you want to turn the situation around.

How Income-Driven Repayment Plans Work

The standard repayment schedule for your student loan is 10 years; however, your payment amount and income does not always match. If you are not earning enough to make your standard loan payments, consider an income-driven repayment plan (IDR).

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Assuming you have a one or more federal student loans, you may be eligible for an IDR plan. The only federal loans not eligible for an IDR are parent student loans. This plan not only reduces your payment, but it also qualifies you for student loan forgiveness after you have made a predetermined number of payments.

IDR payments are anywhere from 10-15% of your disposable income. You calculate it by taking your adjusted gross income and 150% of your state-defined poverty line for your family size. Thus, the loans match your family’s need. Keep in mind:

  • You must reapply for the loan every year.
  • Any portion forgiven may be taxable income.
  • Your loan type determines your IDR plan qualification.

Income-Based Repayment

The amount you pay for an income-based repayment plan (IBR) is based on when you took out your student loans. If you took out your student loans on or after July 1, 2014, the program caps your payments at 10% of your discretionary income. If you make your payments for 20 years, the remain balance is eligible for loan forgiveness.

If you are a borrower who acquired your first set of loans before July 1, 2014, your payment schedule is slightly different. Your payment can be up to 15% of your discretionary income, and you are not qualified for loan forgiveness until you have 25 years of repayment.

The following federal student loans are eligible for IBR:

  • Direct Subsidized and Unsubsidized Loans.
  • Direct Graduate PLUS loans.
  • FFEL Consolidation Loans.
  • Federal Direct Consolidation Loans.

Income-Contingent Repayment (ICR)

Income-Contingent Repayment (ICR) differs from other IDRs because it does not have an income eligibility requirement attached to it. Since there is no hardship associated with this loan, it is easier to qualify for the loan.

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The ICR repayment period is 25 years, and if there is a loan balance left after that period, it is forgiven.  Your payment is either 20% of your discretionary income or the payment amount if you were on a 12-year payment plan adjusted to your income — whichever is the lesser of the two.

Unfortunately, you can have a higher payment amount than you would have with your standard plan.  You do, however, have a fixed interest rate.

The following loans are eligible for ICR:

  • Subsidized and unsubsidized Direct Loans.
  • Direct PLUS Loans made to graduate or professional students.
  • Direct Consolidation Loans.

Income-Sensitive Repayment Plan

The income-sensitive repayment plans payment is between 4% to 25% of your gross monthly income. With this plan, you choose the amount you want to pay; however, it must be equal to or exceed the monthly accrued interest. This plan only lasts five years. This option is excellent for short-term relief. Your payments will increase after five years.  If you cannot afford regular payments at that time, you could switch to another income-driven repayment plan.

This loan program discontinued in 2010; therefore, it is only eligible for those who had loans issued in 2010 or earlier. If your loan falls during the eligibility period and they are one of the loans listed below, you may be eligible to use this program.

  • Subsidized Federal Stafford Loans.
  • Unsubsidized Federal Stafford Loans.
  • FFEL PLUS Loans.
  • FFEL Consolidation Loans.

Pay as You Earn Repayment Plan (PAYE)

Pay as you earn (PAYE) is one of the newer IDR plans and was implemented in 2012. It is a stricter version of IBR.  You must demonstrate a financial need to qualify for PAYE. Furthermore, you must have been a new borrower as of October 1, 2007, and your loan disbursement was October 1, 2011, or later. Lastly, your projected PAYE payments must be lower than your standard plan payment amount

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The loans follow the IDR payment calculation except the amount compared to 150% of the federal poverty guideline is 10% of your disposable income. The repayment period is 20 years, and after that time your remaining balance is forgiven.

The revised pay as you earn (REPAYE) debuted in December 2015. It is like PAYE except you are not restricted by when you took out a loan nor are there any financial hardship requirements.

It is better to use the programs and tools available before you face student loan wage garnishment. Look out for the signs that lets you know you are at risk of defaulting and facing garnishment. Even if you are facing garnishment, you still have options.  You can seek financial advice to find out which payment options are better for you.

If you need help settling a student loan debt, let our team help you find the best match for your situation and your budget. At Solvable, we take care of all the heavy lifting for you. We use our digital platforms to review the best companies after we have performed an extensive verification process. Don’t let your situation keep you from getting help  – contact Solvable today!


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Jowanna Daily
Expert Contributor
Last Updated: