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

By on January 8, 2015

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.


If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

About 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.

15 Comments

  1. Chris Winters

    June 5, 2017 at 1:22 pm

    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.

  2. Laura

    July 26, 2016 at 12:15 pm

    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.

    • JMinneapolis

      July 26, 2016 at 2:45 pm

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

    • Blen Butterson

      July 27, 2016 at 12:48 pm

      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.

  3. Laura

    July 26, 2016 at 12:13 pm

    And once it’s fallen off your credit reports and you have excellent credit that you’ve worked hard to build up for years, why would you want to take steps to have them put it back onto your reports? Let ’em garnish. It’s better than starting the clock again on collections and having it put back onto your report – which it will be.

    • brian

      May 25, 2017 at 10:11 am

      let them garnish? that is the worst advice ever..retard..you have to get a rehabilitation, and after 5 months they stop garnishment, then 4 more months after your 5th payment its forgiven and you can re consolidate.

  4. Amanda Derrek

    June 23, 2015 at 3:15 pm

    I have read all your articles several times on Loan Consolidation and Rehabilitation. My federal student loans are currently being garnished and its killing me financially. I am trying to find out who to contact to rehabilitate my loans….however for some reason I am unable to find that in your articles. Can you please direct me? Great Lakes has my loans at the moment. Thank you so much….your articles have given me hope.

    Also when I log into the ed.gov to file the consolidation form it lists that I have no loans. How do I find the loans to manually enter them? Or did I understand correctly that loans must be rehabilitated before being able to consolidate?

  5. kristoffers

    January 16, 2015 at 4:07 pm

    In 2012, I let my student loan go into default when I lost my job. The balance was around $16,000 I didn’t hear from the Dept of Education until a year and a half later when it had gone into collection. The balance had ballooned to $47,000. I refused to pay anything until they could show how it had gotten that high and they began garnishment. A few months later I went to another company and the garnishment stopped. Now I guess they have found me because the garnishment has started again. No warning, nothing. I am only guessing the balance is upwards of $60,000 now following the same timeline. Is there no way I can settle this debt at closer to the $16,000 I originally owed? Having to pay many times over my debt is something I really have a hard time stomaching, especially when they won’t even tell me how it got that high.

    • Steve Rhode

      January 19, 2015 at 2:39 pm

      A balance ballooning that much is not unheard of considering the 20% to 25% of the balance that gets tacked on as a collection fee.

      Doing nothing is not going to resolve this situation. You will either need to rehabilitate these loans to stop the garnishment or find a bankruptcy attorney who is willing to argue you’ve done the best you could. However the lack of payments is not in your favor.

      See https://getoutofdebt.org/63347/borrow-way-student-loan-default-lower-payment

      It’s too bad someone didn’t mention the Income Based Repayment program to you along the way. Your payment could have been as little as $0 per month and kept you out of collections.

  6. Wolverine68

    January 13, 2015 at 6:35 pm

    I have been paying a student loan age garnishment for 1.5 yrs. How do I get out of wage garnishment and lower my monthly payments?

  7. Mike

    January 13, 2015 at 12:50 pm

    If your debt is in default, you are not in wage garnishment, but the debt is with a collector, and you can now afford to pay the debt, how can you do this and have it taken off your credit report?

    • Steve Rhode

      January 13, 2015 at 1:59 pm

      Just follow the advice in the article. All the detail is right there. The biggest point is if you are in default on your student loan payment because you can’t afford it, you can get a lower payment and be taken out of default. Might seem illogical but there it is.

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