Question:
Dear Steve,
Massive. school student loan debt. they are all federal loans. I had rehab the loans three years ago. Then applied for forbearance in 2015 as I was between jobs. I am back to work, I received a noticed that my wages are being garnished. Not sure how but apparently the forbearance was not processed?? I sent an email to US Dept of ed. to try to figure this out. I dropped the ball on this. After not working, when I returned to work I have been more focused on other immediate debts. I don’t even recall receiving notice that the loan had defaulted.
Should I contact the US Dept of Ed. first to see how to return the loan to good standing? Will they even help given it has now been turned over to a third party. The third party listed on the wage garnishment form, I am concerned that if I reach out to them first, they might lead me down a winding road. Have never dealt with wage garnishment, just stunned.
Stunned
Answer:
Dear Stunned,
Since you had a previous rehab, rehabilitation is not available again. It is a one-time option. The only loophole I can think of is if the loan with the current administrative wage garnishment was not part of the previous rehab.
I’m a bit perplexed by the statement your loans went into forbearance in 2015 and you did not do anything else to extend it. There are two types of forbearances. You can get either a general or mandatory forbearance. A mandatory forbearance my run as long as three years but in either case they both need to be granted again at the end of twelve months.
The mandatory forbearance is used for people where the debt owed is more than 20 percent of the gross income.
“Mandatory forbearances may be granted for no more than 12 months at a time. If you continue to meet the eligibility requirements for the forbearance when your current forbearance period expires, you may request another mandatory forbearance.” – Source
Keep in mind that as long as loans are in forbearance the interest continues to build and you owe more and more.
What can happen in these cases is a notice is sent and thought to be junk mail or the debtor moves and does not update the mailing address with the student loan company.
The best way to stop an administrative wage garnishment is with a rehab but as I mentioned before, that may no longer be available to you.
At this point I would suggest you contact the collection agency/servicer of your loan and find out how to bring the loan back to a non-default status. You can post an update to me in the comment section below and we can take it from there.
I would also urgently advise you to login to the National Student Loan Data System for Students and check the current status and balance for each of your loans. If one got away from you then you’ve got to find out what the current status is of the others. Again, please update me.
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Can you consolidate after the loans have gone to collections? BTW- I’ve known you for about a decade (if you remember me… & your Blog has become an amazing resource for those in debt/debt industry… was Angelo A.’s partner & we met in Raleigh! Hope you’re well!)
Sean! Good to hear from you. Missed you.
The answer is yes but you need to get the loans current again and rehabilitation is a one-time chance to do that.
I have worked with a client in a similar situation. The lender allowed her to consolidate the loans to pull them out of default vs. rehab since it was her 2nd default and it was no longer allowed. If memory serves me correctly, her loans were older FFEL Loans and they allowed the Direct Consolidation. I don’t know the details of your case but thought I would throw that out there as a potential option to check into. Good luck and anxious to hear the outcome.
You are right. If there are loans have not been consolidated before, they could be put into a new Direct Loan and an income payment option could be selected. https://studentaid.ed.gov/sa/repay-loans/default/get-out you might also want to read my piece at http://www.huffingtonpost.com/steve-rhode/the-most-overlooked-way-t_b_5634426.html
Question asked.