Student Loans

I Thought I Had Paid Off My Student Loans But I’m Now Facing a Wage Garnishment

Written by Steve Rhode


Dear Steve,

My student loans were with a collections company a few years ago. I was paying them monthly having it automatically taken from my checking account each month. About a year ago, I got a notice my student loan was paid off and the deductions had stopped coming out. I was pretty proud of this and also had noted on my recent credit report they were marked as closed.

A few weeks ago I got a call from a collection agency saying they were calling about my loans. They asked for personal information. I refused to give them the information and told them my loans were paid off. They said they were planning on garnishing my wages. I asked them to send me a letter explaining the situation so I could properly figure out what was going on and follow up with them.

They said they sent a letter and were not going to resend even if I said I did not receive a letter. A week later I got notification from my company they did get a letter and this company is trying to garnish my wages. I called my original loan holder and they told me I have actually paid off 2 of 5 loans and the collection agency owns 3. It is showing on my credit report as closed because they have closed them as they are sold. I called the collection company to try and work with them and they are refusing and have been very aggressive. I have a week to figure out my options before my wages get garnished.

What are my best options considering my situation. My number 1 priority is to avoid this affecting my credit report. I have been working hard to get my score up and plan to continue to work hard to do so.

Right now the only thing that is holding my credit back it my lack of open credit cards. I have no credit card debt and I don’t have a history of revolving credit loans. This is easy fix to increase my credit score from 704 to higher. I have funds to make payments close to the 15% garnishment. I would like to pay more like 10% as to get to this I am going to have to stop paying into my 401K – something I also want to avoid. I don’t have the funds however to pay it full out.

I have looked at getting a Direct Consolidation Loan and can do that but am scared that will affect my credit. Is it possible to get a consolidation loan from a private lender to pay off the collections? Will they even give me one? Should I call collections and see about cutting a deal for payment so I can keep this off my credit report as they don’t seem to be reporting it. I also think if I am diligent I can pay these off within the next 2 years. It is $19,000 worth of debt….HELP! What would you do.



Dear DB,

It’s not clear if the loans that are currently with collections are private student loans or federal student loans. When you mentioned a Direct Consolidation Loan that points at being federal.

There is a big difference in how to best tackle these if they are private or federal so please post an answer to that in the comments section below.

But the short answer is if these are federal student loans then you will want to look at Rehabilitation to get them out of default and stop the Administrative Wage Garnishment. Please read The Easiest Way to Stop a Student Loan Wage Garnishment.

Let me know which these are.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


Leave a Comment

Scroll to Top