Student loans are a big burden for many people. When you can’t pay them back, you may be worried about how much student loan debt can garnish your wages.
In this article we’ll go over what garnishment is and how it works. We’ll also talk about the different types of garnishments and what they mean for your paycheck.
What is Garnishment?
Garnishment is when a creditor takes money from your paycheck or bank account to pay off your debt. Creditors are allowed to do this in certain circumstances, such as if you have defaulted on a loan or if you haven’t paid child support.
How Much Can Student Loans Garnish Your Wages?
The amount that student loans can garnish depends on where you live, what type of debt it is (like federal or private), and how much money you make each month. In general, most creditors can’t take more than 15% of your income once taxes have been taken out—but there are exceptions! If you have private student loans through Sallie Mae or Wells Fargo Bank, these companies may be able to take up to 25% of
How Much Can Student Loans Garnish Your Wages
When it comes to federal student loans, you have plenty of rights when it comes to wage garnishment. For example, you have the right to be sent a notice from the U.S. Department of Education that explains its plans to garnish your wages in 30 days, as well as the information regarding your debts. You also have the right to see records relating to your student loan debt.
Additionally, there are plenty of steps you can take to avoid wage garnishment on defaulted student loans.
Wage garnishment takes place when a loan holder orders your employer to withhold a percentage of your pay in order to force you to repay past-due student loan balances. For federal loans, you must have missed nine months of payments before the government can garnish your wages, although this may vary for private loans.
For the most part, garnishment is a last-ditch effort to try to get student loans paid back. When it comes to federal student loans, wage garnishment can take place without your loan holder taking you to court. However, most states require loan holders to obtain a court order to garnish your wages if you default on private student loans.
With federal student loans, wage garnishment can continue until your loan balances plus interest and fees are paid back, but it can also end if your loan is removed from default. Also note that as part of a series of COVID-19 protections, the federal government has paused all wage garnishment on defaulted federal student loans through at least Aug. 31, 2022.
Student loan wage garnishment works like this: Default on your federal student loans and the government can take up to 15% of your paychecks. For someone who normally takes home $2,000 each month, that amounts to $300 garnished.
Payments have been paused for most federal student loans since March 13, 2020, as part of the first coronavirus relief bill. Wage garnishment and other collection activities were also paused at the time. The moratorium was extended to commercially held FFEL borrowers on March 30, 2021. Those protections have been extended through six months after payments resume.
The student loan payment pause was most recently extended to August 31. Along with that announcement, borrowers with defaulted student loans were lifted back into good standing. That means those borrowers will get a fresh start when payments resume. But sliding back into default is still a risk — it happens after 270 days of delinquent payments.
The Department of Education has said it will return any money seized between March 13, 2020 and the end of the relief period. But if your wages are still being garnished, talk to your human resources department about your situation.
If your were facing student loan wage garnishment before relief went into effect — or you might when it ends — don’t panic; you have options that are far less painful than a 15% hit to your paycheck.
How much can be garnished for student loans?
Loan holders can garnish up to 15 percent of your disposable pay to repay your federal student loans and up to 25 percent of your disposable pay to repay private student loans — though this can vary by state. “Disposable pay” in this case means the amount of money you receive in your paycheck after applicable deductions.
how to stop student loan garnishment after it starts
Wage garnishment can be avoided. Typically, it’s a last resort for creditors. They will let you know when your payments are past due and give you several warnings before your loans end up in default.
However, if you miss your payments, expect your servicer to take aggressive action to get their money back. If you’re worried about wage garnishment, follow these steps to prevent defaulting on your student loans.
- Make consistent, timely payments
If you have multiple student loans, remembering the different minimum payments and due dates can be confusing. Setting up automatic payments or reminders can help you keep track of your payments, minimizing the risk that you’ll miss one.
- Sign up for an income-driven repayment plan
If you are struggling to afford your payments, an income-driven repayment (IDR) plan may make your payments more manageable. Under these plans, the government extends your repayment term and caps your monthly payment at a percentage of your discretionary income. An IDR plan can dramatically reduce your monthly payment.
While you will likely pay more in interest over the length of your new repayment term, an IDR plan can be a big help when you’re on a small salary compared to your balance.
- Apply for deferment or forbearance
While making your payments is important, there may be times when it’s not affordable. If you’ve lost your job or are facing a medical emergency or other economic hardship, your student loans may be your last priority.
Rather than letting your loans enter default, you can contact your lender and defer your payments or enter forbearance. This process allows you to postpone payments — without entering default — while you get back on your feet.
How to stop student loan garnishment
If you’re already facing wage garnishment, don’t give up hope. You can still take control of your debt — and your paycheck. Consider these three ways to get out of default and stop student loan wage garnishment.
- Consolidate your loans
One way to get out of default is to combine one or more federal loans into a direct consolidation loan.
If your loans are in default, the government requires you to sign up for an income-driven repayment plan in order to repay a direct consolidation loan. Or you can make three consecutive, voluntary and on-time payments on your defaulted loans before consolidating.
Consolidating your loans can extend your repayment period and reduce your payments, but you may end up paying more in interest over the length of the new loan. Still, consolidating your defaulted loans can help get your loans back in good standing.
- Rehabilitate your student loans
Another option is to rehabilitate your loans. Under a loan rehabilitation agreement, you promise to make nine monthly payments during a period of 10 consecutive months. The loan servicer will work with you to set monthly payments that are 15% of your annual discretionary income divided by 12.
Depending on income and financial obligations, rehabilitating student loans may result in some borrowers paying as little as $5 a month.
- Pay off your debt in full
While it may sound impossible, paying off your debt in full can be the fastest way to get out of default and end wage garnishment. Because defaulting on your loans can wreck your credit, it may be worth dipping into savings, if possible.
Or, if you have a relative or loved one who can help, it may be a smart idea to ask them for assistance with your debt. But make sure to keep some emergency savings intact in case of job loss or a medical emergency while you’re planning to pay off loans.
How to dispute student loan garnishment
If you receive notification from the U.S. Department of Education that your wages will be garnished to pay off your student loans, you may be able to dispute it for the following reasons:
A wage garnishment would put you in “extreme financial hardship.”
You’ve been involuntarily unemployed and are now employed, but have been for less than 12 months.
In order to object to the garnishment, you’ll need to request a hearing in writing within 30 days of receiving notification that your wages will be withheld. Your student loan lender will arrange the hearing, and, in the meantime, you’ll need to gather proof to support your dispute.
After the hearing is held, you should be given a ruling within 60 days, starting from the day your request was received.
If the decision is made in your favor, either you may avoid garnishment for the next 12 months or the withholding percentage will be reduced.
If your dispute is unsuccessful, the government will move forward with the 15% wage garnishment.