Student loan garnishment is the act of removing money from paychecks to repay student loans. In many cases in the US, the US government has the right to garnish or remove money from wages if a person with student loans is not keeping his/her agreement to repay them. This is often called default. Unlike many other creditors, any federal student loans don’t require lengthy court cases or judges’ orders in order to remove money from a person’s pay. Instead, when loan default meets certain conditions, the government may automatically begin to remove money from someone’s pay, and any employer must comply with the student loan garnishment request.
The government is limited as to the amount they can take from a paycheck, and can only remove 15% of wages. However, any wages remaining must be equal to or higher than minimum wage times 30. Those making very low incomes would not have that much garnished. Yet, other things may be subject to student loan garnishment, and these could include tax refunds. Provided only the individual who owns the loan receives the refund, it’s possible for the government to take the whole amount. Should two people (such as a married couple) be receiving a refund, there are forms that can be filed so that part of the refund is returned.
This issue can get a little complicated. Even if the person who owes the student loans has made no money, part of a joint tax return can be subject to deductions to pay student loans. Though only one member of the couple is financially responsible for the loans, both may suffer if loans go into default. The government usually cannot garnish the direct wages of the person who did not take out the loans, though, unless that person was a cosigner on the loan.
There are a few things that people can do to stop student loan garnishment, at least on a temporary basis. They can request a hearing and challenge the right for the government to remove wages. They may win the challenge at a hearing if the loans are no longer owed, or if they can prove permanent disability. Another point that students may want to bring up is if they took out the loans for a school that closed in the midst of an education year. In this case loans may be forgiven.
A hearing could also be an opportunity to discuss repayment structure and try to evolve a structure that is more reasonable based on income. In very rare circumstances, some forms of bankruptcy might successfully challenge the government’s right to remove pay, but most loans are not forgiven when bankruptcy occurs. Another common argument is that removing pay results in financial hardship, and this may possibly work.
It is far better to try to address these issues before students or former students receive a letter telling them that student loan garnishment will occur. Many loans can give several years of non-payment options based on things like financial hardship. People who return to school on a part-time basis could also defer paying loans. There are a lot of ways to defer loans if needed that won’t damage credit, and won’t remove money from a paycheck or tax return.
