Can My AmeriCorps Award Stop My Student Loan Wage Garnishment?

Question:

Dear Steve,

I have a loan that is currently up for wage garnishment by Texas Guaranteed. I just started a new job, my first salaried position and my HR just alerted me that they have asked to garnish my check and they already took my tax refund. I have an AmeriCorps Segal Education award as I just finished a few months ago that I want to apply.

Is it possible to have my AmeriCorps Segal Education award cover my student loan debt that was just requested from Texas Guaranteed to garnish my wages from ny new job or possibly stop them from garnishing my check? My job asked me how I wanted to proceed.

Answer:

Dear R,

Congratulations on your new job.

In Texas there are only a few issues that are allowed to garnish wages: unpaid income taxes, court ordered alimony and child support, and defaulted student loans. Lucky you.

It sounds like what you have is an Administrative Wage Garnishment for money you owe the federal government. This is further verified by your statement your tax refund was intercepted. Of course the best way to avoid a tax refund intercept is to not get a refund. You might want to consider adjusting your withholding so you break even at the end of the year for taxes. This would prevent an intercept.

This tells me your loans have been in default for more than 270 days and are in a problematic state. There are options to never allow loans to get to default. For example, consolidating federal loans and putting them in an income driven repayment program can result in a monthly payment as low as zero dollars a month and keep the loans current.

Once a loan goes into default the balance can grow by as much as 20% just from added collection fees. This doesn’t even include the building interest on the loan.

You should read The Easiest Way to Stop a Student Loan Wage Garnishment – Loan Rehabilitation and get on this straight away. In 80% of rehabilitation cases the rehab payment is only $5 more per month.

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It sounds like you had the opportunity to serve in AmeriCorps and I’m sure you gained so great life experience out of the experience.

The Segal AmeriCorps Education Award is given to people who complete 12 months of service. You can opt to have your award applied to the balance you owe on your federal student loans. And currently, if you worked full-time for AmeriCorps during your service you would be eligible for $5,815.00.

According to AmeriCorp, you can manage how your award payment is dealt with through the My AmeriCorps website.

Accessing and managing your Segal AmeriCorps Education Award has never been easier. By registering to use the online system, you can check your award balances, access important important financial information, request forbearance, and, most importantly, easily make payments to your educational institution or loan holder.

So while your service award could be applied towards your balance, and would lower it, I don’t see how it would reduce your payments or stop the current Administrative Wage Garnishment without rehabilitation.

The main thing you need to do immediately is login to your AmeriCorp account and see if your award was applied to your federal student loan and also to contact your loan servicer to ask about rehabilitating your loans out of default. Texas Guaranteed says, “If you have been notified that TG is planning to garnish your wages and you want to find out more about your rights or how to avoid having your wages withheld, call (800) 222-6297, ext. 4125, or send TG an email message.”

Texas Guaranteed provides this information on the rehabilitation program.