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What Can My Husband Do When He Defaulted on His Student Loan Rehabilitation and is Now Getting His Wages Garnished?

Written by Steve Rhode


Dear Steve,

My husband has a 25+ yr old student loan that went into default about 7 years ago. He entered a student loan rehabilitation program but wasn’t able to complete it because the loan rehab administrator set the payments too high for his budget. The loan has now continued to be in default ever since. For the past year, the student loan company has been garnishing his wages 2 times monthly… they’re calling it a “voluntary deduction”.

Thank you for taking my question! I’m aware of a regulation that says once you’ve failed to complete a student loan rehabilitation program, you are no longer eligible to enter the program again. So,

I’m assuming that my husband’s student loan is no longer able to be rehabilitated. My question… Is it possible for my husband to stop the current wage garnishment? And is there a way for him to get his loan out of default, other than just immediately paying off the loan? Thank you again!




Dear Maya,

Post the answers in the comments section below.

Does he only have the one loan?

I’m assuming this is a federal student loan, correct?

It is too bad the servicer did not tell him about the alternative process if the payment was too high. According to the Department of Education, “If you can’t afford the initial monthly payment amount described above, you can ask your loan holder to calculate an alternative monthly payment based on the amount of your monthly income that remains after reasonable amounts for your monthly expenses have been subtracted. You’ll need to provide documentation of your monthly income and expenses, including a completed Loan Rehabilitation: Income and Expense Information form. Depending on your individual circumstances, this alternative payment amount may be lower than the payment amount you were initially offered.”

But here is what he might want to consider now. This advice comes straight from the Department of Education. – Source

Your loan holder can order your employer to withhold up to 15 percent of your disposable pay to collect your defaulted debt without taking you to court. This withholding (“garnishment”) continues until your defaulted loan is paid in full or removed from default.

With garnishment, you have the right to

  • be sent a notice that explains ED’s intention to garnish your wages in 30 days, the nature and amount of your debt, your opportunity to inspect and copy records relating to your debt, your right to object to garnishment, and your option to avoid garnishment by voluntary repayment;
  • be given an opportunity to enter into a written agreement under terms agreeable to ED to establish a voluntary repayment agreement;
  • be given an opportunity for a hearing to present and obtain a ruling on
    • any objection you have to the existence, amount, or enforceability of the debt;
    • any objection that garnishment of 15 percent of your disposable pay would produce an extreme financial hardship; or
    • any objection stating that garnishment cannot be used at this time because you’ve been employed for less than 12 months after having previously been involuntarily separated from employment;
  • have the garnishment action withheld by filing a timely request for a hearing, until the hearing is completed and a decision issued;
  • not be discharged from employment, refused employment, or subjected to disciplinary action due to the garnishment, and to seek redress in federal or state court if such action occurs;
  • initiate any legal action against your employer if the employer discharges, refuses to hire, or takes disciplinary action against you based on the garnishment action; and
  • not have any information provided to your employer regarding the garnishment other than what is necessary for the employer to comply with the withholding order.

One way to avoid garnishment of 15 percent of your disposable pay is to negotiate repayment terms acceptable to ED or the private collection agency and ensure that ED receives the first payment no later than 30 days from the date the garnishment notice was sent.

Your other option to avoid garnishment is to make a request for a hearing. You should

  • make a hearing request in writing, postmarked no later than 30 days from the date the garnishment notice was sent;
  • make a request for a hearing, even if you are requesting copies of documents, because requesting documents doesn’t delay a garnishment order;
  • provide proof to support any objection made to the existence, amount, or enforceability of the debt, or financial hardship; and
  • pay any expenses you incur to obtain legal representation and to attend an in-person hearing. (All in-person hearings are held at one of the three regional offices: Atlanta, Chicago, or San Francisco. You are responsible for the cost of attending and the cost of any witnesses that attend on your behalf.)

Your loan holder will arrange the hearing. The hearing may be held in person or on the phone or may be based simply on records you submit to make your case. A decision about whether your wages will be garnished will usually be made within approximately 60 days from the day that your hearing request is received.

If you are successful in your hearing, then your wages will not be garnished (for a period of 12 months) or the amount garnished may be reduced (partial garnishments are reviewed annually).

If you are unsuccessful in your hearing, then your wages will be garnished at the full 15-percent rate allowed by law.


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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.


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