The Easiest Way to Stop a Student Loan Wage Garnishment – Loan Rehabilitation

I can’t tell you how frequently people ask me for the best advice to deal with an Administrative Wage Garnishment for a federal student loan. It’s quite often.

And the tragedy is the wage garnishment could have been easily avoided. The loans should never have been allowed to get to that point because there are such good programs to avoid the garnishment.

When it comes to federal student loans the government does not have to sue you or take you to court to just start taking your wages.

Federal student loan servicers are frequently not very helpful when wages start being garnished. I’m not sure if it is because they just don’t care or don’t know about options. Regardless, the end result is the same, wages can be garnished for up to 25% of income if someone has more than one student loan. If all the loans were previously consolidated into one or they only have one in trouble then the maximum is only 15%.

If you find yourself with an Administrative Wage Garnishment the best way out is through the U.S. Department of Education loan rehabilitation program.

If your student loan servicer or collector won’t give you the straight scoop on how to use rehabilitation to stop the wage garnishment, contact the Department of Education for some advice.

In general though, the Department of Education must agree to a reasonable and affordable payment, that will be temporarily tacked on above your wage garnishment. I’ve seen these payments as low as $5. If you go this route and bite the bullet for the five required payments, the wage garnishment will stop.

The government generally uses the following process to determine your payment, “…once the rehabilitation discussion has begun, initially considers a borrower’s reasonable and affordable loan rehabilitation payment amount to equal 15 percent of the amount by which the borrower’s Adjusted Gross Income (AGI) exceeds 150 percent of the poverty guideline amount applicable to the borrower’s family size and State, divided by 12. If the amount determined using this calculation is less than $5, the borrower’s monthly rehabilitation payment is $5.” – Source

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After nine months the loan will be considered rehabilitated and reported as current again to the credit bureaus.

If you’ve been paying attention you should be asking yourself what happens between the fifth payment when the garnishment stops and the ninth payment when the loan is rehabilitated. The answer, you just have to make that smaller payment.

Once the loan is rehabilitated you go back to a good status with the Department of Education and you’ll be eligible for your choice of consolidating your student loans and a permanent lower payment repayment plan. If you’ve been struggling I’d suggest you take a good hard look at the Income Based Repayment (IBR) program.

In the Income Based Repayment program the government will give you some monthly payment breathing room and reduce your payments down to a level based on your income, discretionary income, and their calculations. After 20-25 years of low payments your student loans will be forgiven.

If you qualify for the Public Service Loan Forgiveness program, after ten years of really low payments the balance can be forgiven. This program is a real blessing for those in the military, teachers, and government employees. For more information, click here.

So there you go, there is no need to ever let your student loans lead to a wage garnishment and if they have, this process is a sure way out of the garnishment pain.


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16 thoughts on “The Easiest Way to Stop a Student Loan Wage Garnishment – Loan Rehabilitation”

  1. I am in a repayment hardship program already but the Dept. of Education still starting taking 225 a month from my Social Security check…I am on a fixed income and thought that when I started the hardship repayment program that in 9 months I could redo my loans but the Dept. of Education started taking 225 out of my Social Security check in addition to my already paying monthly on the hardship program…I call them and they said I could file a form but that they will still take it out of my check for 3 more months…my question is that why the hell did I even start the repayment program if they are still going to make it impossible to live….they don’t communitcate with each other because they are two separate entities…can I file a stop order or something with the court?? I am in dire straits here and don’t know where to turn….

  2. Steve, I had no idea that the department of education could help with loan rehabilitation. It seems like wage garnishment can be financially devastating. I have a cousin who is unable to pay off a loan and I think that he should find some professional help before his wages are garnished.

  3. What I mean by the below is – after a number of years, the defaulted loans no longer show on your reports. Some of us have in that time period built up excellent credit and worked darn hard at doing it. No one defaults for fun, it was way more of a burden than was possible to handle.

    Why would anyone want those loans and heavy debt listed back on their reports? No one I know. But that is exactly what they will do if you work out a settlement with them. Clock restarts and info gets put back on reports if you agree to any kind of payment plans. Let ’em garnish. At least I’ll keep the good credit on my reports that I’ve built up for years.

    • Wouldn’t a loan that’s garnishing your wages still be active and reporting as delinquent and being garnished on your credit?

    • There is no clock to restart on federal loans. They have no statutes of limitation. They may come off of your credit report after years of inactivity, but they can still garnish wages and even take your SSI. And then reappear on your credit report. Federal loans rarely settle for any type of significant reduction. Federal loans will keep collecting, often through forced collections, for decades and decades, until a borrower is deceased or the loan is paid off. Garnishment is also the most expensive way to pay off a federal loan, since a huge chunk of each garnishment payment goes towards fees and interest before it touches the principal.


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