Question:
Dear Steve,
Paychecks being garnished. The garnishment is a percentage so I can not budget. Student loan folks calling to offer a repayment option that is “voluntary”. Want additional monies along with garnishment. Came to $64 more but did not agree as I am receiving eviction notices for late and short payments on rent. Being offered again….
Should I just let garnishment continue or is there some way to have the percentage rate reduced?
With Trump incoming should I hold off on make any changes just yet? About 5,000 left to pay off at this point; can fees or interest be discontinued? Looking for an effective way to curb amount and pay off within year or 2.
Jeanin
Answer:
Dear Jeanin,
Thanks for writing me.
Without more information on your loans I am assuming these are federal student loans and the repayment option offered is a federal loan rehabilitation approach. Rehabilitation is the easiest way to stop a federal student loan wage garnishment. You can read more about the solution, here.
What makes me assume this is a rehabilitation offer is the additional amount they are asking for. The rehabilitation payment is determined to be 15 percent of your discretionary income. Discretionary income is “is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence.For Income-Contingent Repayment, discretionary income is the difference between your income and 100 percent of the poverty guideline for your family size and state of residence.The poverty guidelines are maintained by the U.S. Department of Health and Human Services and are available at www.aspe.hhs.gov/poverty.”
This is a payment offer and if you can’t afford it then you have an option. According to the Department of Education “you can ask [the Department of Education] or the guaranty agency to recalculate the payment amount based on your documented income and expenses. Depending on your individual circumstances, this recalculated payment amount may be lower than the payment amount you were initially offered. You can choose either of the payment amounts.” Nearly 85 percent of people on rehabilitation programs pay $5 more per month.
The rehabilitation program is a one-time offer and will stop the wage garnishment after five payments and after 9 payments you will be able to have your loan brought current. Unfortunately at this point you have probably had additional collection fees added to your account and the loan balance is higher than before you went into default.
Once your loan is out of default you will be able to consolidate it into a new Direct Loan and opt for one of the income-driven repayment plans to get the lowest payment possible while you surf through these difficult economic times.
It’s important to not that before your wages were garnished you should have received a notice of a pending garnishment. That notice gives consumers the steps necessary to appeal the garnishment and if a solution is entered within 60 days of the notice the collection fees can be waived at that point.
With President Trump coming into office I would suggest you not wait since the rehabilitation program will take nine months to get the loans out of default. Once out of default we will just have to wait to see what repayment programs Trumps administration actually makes available.
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Answer posted.