Understanding the possibility of your income being reduced due to student loan repayment issues
In the United States, millions of student borrowers could face wage garnishment as early as this summer, according to estimates from credit bureau TransUnion. To prevent this financial hardship, it's crucial for borrowers to understand their options and take proactive steps.
Firstly, missing payments on federal student loans for over nine months typically leads to loan default, which can result in up to 15% of wages being garnished without a court order. To avoid this, borrowers should consider contacting their loan servicer to request forbearance, deferment, or loan forgiveness, and switching to an income-driven repayment (IDR) plan to lower monthly payments and maintain good standing.
Forbearance can temporarily suspend payments due to hardship, while deferment can pause payments under qualifying circumstances such as unemployment or being in school. Deferment may also pause interest for some loans. Income-driven repayment plans adjust payments based on income, making it easier to stay current and avoid default.
Upon default, the Department of Education issues a 30-day notice of garnishment. During this period, borrowers can object or request a hearing to contest garnishment or claim hardship. Grounds for objection include recent job changes (less than 12 consecutive months), pending statutory discharge applications (e.g., school closure, total disability, bankruptcy), and financial hardship.
Engaging with your congressional representatives may also provide assistance or advocacy options. Borrowers can request assistance from their member of congress - their representative or senator - through a casework tool that can guide them through submitting a constituent request.
Common reasons for statutory discharge of student loans include school closure before degree completion, school failure to pay refunds, total disability, or bankruptcy. If borrowers find their loans are in default, they can remove them from default by entering a rehabilitation agreement or by consolidating their loans into a new federal Direct Loan.
Richelle Brooks, an education administrator, is one such borrower, facing monthly payments of approximately $3,000 on her outstanding student debt of $239,000. She can request a hearing to object to garnishment if it would cause financial hardship, and this request must be made in writing within 30 days after the garnishment order. Borrowers can check whether their federal student loans are in default by logging into studentaid.gov.
In summary, communication with the loan servicer to explore repayment options and timely response to garnishment notices are critical to avoiding or stopping wage garnishment for federal student loans.
- To prevent the potential financial strain of wage garnishment due to student loan default, borrowers in Seattle might consider reaching out to their congressional representatives for assistance or advocacy.
- For those facing the prospect of wage garnishment on personal-finance matters, such as student loans, it's essential to be aware that, upon default, contacting the Department of Education within the 30-day notice period to object or request a hearing can help contest the garnishment or claim hardship.
- In the realm of education-and-self-development, understanding the consequences of loan default (such as wage garnishment, up to 15% without a court order) and proactively engaging with loan servicers, like requesting income-driven repayment plans to lower monthly payments, can help maintain good standing and prevent such financial hardships.
