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The US Department of Education is resuming collection efforts on defaulted student loans starting on Monday. If you’re more than nine months behind on your student loan payments, that means your wages could be garnished as soon as this summer.
It may sound scary, but wage garnishment to pay off a debt isn’t new. Currently, some Americans have their wages garnished to pay back taxes, child support, and other debt, including student loans. It just might feel “new” since there were protections in place to allow borrowers in default time to catch up since the COVID-19 pandemic. But starting in May, payments will begin to come due.
“This is actually the norm,” said Elaine Rubin, a student loan expert and corporate communications director for Edvisors. “If a loan is in default, then actions will be taken to then collect on the default loan.”
Student loans are considered in default after you’ve missed 270 days of payments (excluding payment pauses). It’s estimated that 5 million borrowers are in default and will have their loans sent to collections next week. If you’re one of them, here’s what you need to know.
When will the government start garnishing wages for student debt?
There’s less than a week left to pull your loans out of default, with the administration indicating it plans to restart collection efforts on May 5. However, that doesn’t mean you’ll see a hit to your paycheck starting next week. The Department of Education has to notify you 30 days ahead of your wage garnishment.
Expect your defaulted student loan account to move from your current servicer to a private collections agency around the beginning of May and wage garnishment to begin about one month later, Rubin explained.
Will SAVE borrowers have their wages garnished?
There’s a lot of confusion on Reddit and social media about how wage garnishment will affect SAVE borrowers. If you’re enrolled in the Saving on a Valuable Education plan, your loans have been placed in an administrative forbearance since last summer. With SAVE on hold, millions of borrowers have not been required to make payments, which has led to some wondering if that means their loans are in default.
“It is confusing, because they haven’t been making a payment and believe that it could be at risk of defaulting,” said Rubin. “If you’re not required to make a payment because you’re in an approved forbearance, a deferment, or you actually have a $0 IDR payment, technically, you’re making a payment in that situation.”
The best way to check if your loans are in default is to visit StudentAid.gov or your loan servicer’s website to check your loan standing.
How will I know if my wages are being garnished?
You can check to see your current loan standing on the StudentAid.gov website or by logging into your loan servicer’s website. If your loans are in default and the Department of Education begins the collections process on your debt, you’ll receive a letter in the mail from the department 30 days in advance. This letter will contain your options, including the ability to voluntarily reenter repayment or object to having your wages offset.
How much can the government pull from my paycheck?
The federal government will pull a percentage of your take-home pay (the amount you receive after deductions) to put toward your student loan debt — up to 15%. It won’t take all of your paycheck. Your tax refund or Social Security benefits could also be garnished.
Can I prevent my wages from being garnished?
Yes, there are steps you can take to avoid wage garnishment, but they may not be feasible for everyone.
“As far as 100% preventing it, not everyone is going to be able to do that,” Rubin said. The two best options for most borrowers will be applying for a loan rehabilitation or direct loan consolidation. The third is to pay your loan in full, which Rubin acknowledged will not be possible for most borrowers.
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