Wage garnishment refers to a process where a party who is owed a debt gets paid a portion of an employee’s income directly from their employer. Garnishments can occur for numerous types of debts, including delinquent student loans. The garnishment process and the garnishment limit depend on the type of loan and the state where the garnishment is taking place. Federal garnishment law is established through the Consumer Credit Protection Act (CCPA,) but state garnishment laws also apply and can significantly vary.
Types of Loans
Student loans come are generally one of two kinds: those guaranteed by the Federal Government (including Stafford and Perkins loans) and those from private lenders. However, due to the complexity of the student loan process, it can sometimes be difficult to determine if your loan is federal or private, as it’s not uncommon for the same lenders to be involved in both types of loans. One way to find out is to search the National Student Loan Data System, located at http://www.nslds.ed.gov/nslds_SA/. If your loan is listed here, it’s a federal loan. If not, it’s a privately-funded loan.
Student Loan Garnishment Process
The main difference between the garnishment of federal and private student loans is that the Federal Government can conduct what’s called an Administrative Wage Garnishment, meaning they don’t have to obtain a court order to begin the garnishment. Private lenders are required to have a court order to garnish wages.
The law requires that the lender exercise “due diligence” in collecting payments from you before filing for a wage garnishment, meaning you’ll likely receive numerous bills and/or phone calls prior to receiving a garnishment notice. Assuming that you don’t object to the notice, the notice will be forwarded to your employer, who is required by law to comply.
If your loan is a Federal loan, up to 10% of your disposable income can be garnished to repay your debt (this is what’s left after deductions required by law, such as taxes). The maximum they can take is 30 times the current minimum wage.
Private guarantors can garnish up to 25% of your disposable income under Federal law, again up to 30 times the current federal minimum wage.
When federal and state laws conflict, the law that favors the employee (i.e. resulting in the smaller garnishment) applies. Some state laws allow for up to 25% of disposable income to be garnished, while in two states (Texas and Pennsylvania) wages can’t be garnished at all for private student loans.
Stopping a Student Loan Wage Garnishment
The quickest and easiest way to stop a student loan wage garnishment is to simply contact the creditor to pay the debt or make arrangements for a payment plan. However, if this isn’t an option, you can file an objection to the garnishment based on financial hardship.
This requires completing a form (see the link in resources, below) and providing documentation of your income and expenses. In general, to get approved for a hardship exemption you’ll need to show that the wage garnishment would cause extreme financial distress for you and your family, such as causing you to be evicted or your home to be foreclosed on. You have 30 days from the date you receive the notice of garnishment to file this document. You’ll then be given a hearing where you can present evidence and testify.
You can also object to a wage garnishment in various other scenarios, including:
- If the loan doesn’t belong to you
- If you’ve recently begun making payments on the loan
- If the school or university owed you a refund which they didn’t provide
- If the loan documents were forged (it wasn’t actually you who signed them.)
Questions about student loan wage garnishments should be handled by a qualified attorney who is familiar with wage garnishment law in your state.
- Federal Student Aid, Administrative Wage Garnishment –http://www.ed.gov/offices/OSFAP/DCS/awg.html , http://www.ifap.ed.gov/ifap/index.jsp
- U.S. Department of Education Student Financial Aid website –