How to Stop Student Loan Wage Garnishment

Student loan garnishment works like this: miss several monthly payments, and your loan holder can take a part of your paycheck. The federal government doesn’t have to sue you before it can garnish your wages. It can use its administrative wage garnishment powers to withhold up to 25% of your paycheck to repay defaulted federal student loan debt.

Private lenders like Navient, Sallie Mae, and SoFi don’t have those same powers. Before they can touch your paycheck or bank account, they have to sue you and get a court order that gives them the authority to garnish your wages. The amount they can take depends on where you live.

It’s easier to get out of a student loan garnishment by working with your student loan servicer or the debt collection agency before the garnishment order is sent to your job. You have fewer options to stop it after the money starts coming out of your paycheck.

Ahead, learn how to stop a student loan wage garnishment before or after it starts.

Related: Student Loan Forgiveness 2022: Who Qualifies

*The U.S. Department of Education has suspended student loan garnishments for federal student loan borrowers until late 2023. It’s also allowing borrowers with defaulted federal loans — even those who’ve defaulted twice — to return their loans to good standing by agreeing to new repayment terms. Contact the Default Resolution Group and ask the representatives about the Fresh Start Program for student loans.

You can stop a student loan wage garnishment before it starts by making payment arrangements with the creditor, including requesting a deferment, forbearance, or switching to an income-driven repayment plan. Once your loans default, those options are no longer available until you bring them current.

You can stop a student loan wage garnishment by:

• Negotiating a payoff

• Applying for loan consolidation

• Entering the loan rehabilitation program

• Signing up for a monthly repayment agreement

Federal student loan settlements are expensive and out of reach for most borrowers. You’ll typically save 50% of the outstanding interest and 10% of the principal loan balance, and you must pay that amount in 90 days. Learn more about the federal student loan settlement process.

Consolidation gets you out of default fast, but you’ll have to apply before a wage garnishment order is sent to your employer. You can apply for a Direct Consolidation Loan on StudentAid.gov. Read more about how to consolidate defaulted student loans.

Loan rehabilitation is a one-time program. Rehabilitation stops wage garnishment, tax refund offset, and Social Security benefit seizure. To enroll, you’ll agree to make nine monthly payments. Your payment amount will be 15% of your discretionary income or your monthly income with accepted living expenses deducted. Rehabilitation is popular because it’s the only option that removes the default status from a credit report. But that benefit typically doesn’t significantly raise a credit score. Learn how student loan rehabilitation works.

A repayment plan won’t get you out of default, but it can keep your paycheck safe from garnishment if you move quickly. You have 30 days from the date you get the notice of intent to garnish to establish a payment plan and make the first payment. More on the notice of intent below.

Learn More: Collection Costs on Defaulted Student Loans

You have four options to stop a student loan garnishment that’s already underway:

• Negotiate a settlement. You’ll need to pay a sizeable part of the loan balance in a lump sum before the garnishment is removed. If you or your cosigner are being garnished for private student loans and you can’t afford the settlement, you may be able to pay off the loans by refinancing with a new lender. Contact Yrefy to discover their interest rates and repayment terms for refinance loans.

• Enter into a rehabilitation agreement. The Education Department will suspend the garnishment after you’ve made your fifth monthly payment. That means you must make the payments on top of the garnishment amount before the withholding ends.

• Request a hearing. The garnishment can be lifted if you show you didn’t borrow the loans, you made your student loan payments on time, or that the garnishment is causing you and your dependents extreme financial hardship.

• File bankruptcy. While filing bankruptcy won’t get rid of your loans unless you can prove the loans are causing you undue hardship, it will temporarily postpone the garnishment, giving you time to catch your brief and find a way to tackle your loans.

Once the garnishment starts, the Education Department won’t let you use the consolidation process to get out of default.

Related: Can My Spouse’s Wages Be Garnished for My Student Loans?

You can reverse a student loan garnishment for federal loans if you can convince the Education Department it didn’t send you a garnishment notice before moving forward with wage garnishment. You can reverse or set aside wage garnishment for private student loans if you convince the judge you weren’t properly served with notice of the lawsuit before it entered a default judgment against you.

Related: How to Get Rid of a Student Loan Judgment

If you’re worried about wage garnishment, it’s critical to act now. I’ve helped hundreds of borrowers like you explore their repayment options and choose the best option to dig out of student loan default and return to good standing.

Schedule a call with me today. We’ll review all your options to prevent or end your student loan wage garnishment.

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