Question:
Dear Steve,
I just got word from my employer that they will be garnishing my wages due to unpaid student loans. This is the second time this has happened to me. I went through the rehabilitation process the first time but was told at that time this you can only be eligible for that once.
I also did not graduate from college. What would you suggest would be my best plan of action? Thank you!
Gina
Answer:
Dear Gina,
If I read this correctly it seems that one of the loans you previously rehabilitated is again in default. It is true that the U.S. Government allows people access to rehabilitation only once per loan. So if one of the loans was previously rehabilitated then your options are limited.
Rehabilitation is a great tool to stop or avoid wage garnishment. See “The Easiest Way to Stop a Student Loan Wage Garnishment – Loan Rehabilitation” for details on this very helpful program.
Once you are the rehabilitation program you are asked how you would like to repay your included student loans. If you can’t afford the full student loan payment then you should opt for the income driven option.
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.
So it sounds as if your loans are federal student loans. If there is any good news here it is that you can go about the rehabilitation process again for any loans you had not rehabilitated previously.
But you do have another option for loans not eligible for rehabilitation. Unfortunately this is going to cost you more upfront money.
You should read, “How to Borrow Your Way Out of a Student Loan Default and Lower Your Payment” for the details.
However, to be eligible for consolidating your loans into a new Direct Consolidation Loan you will need to “make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.” – Source
Once the loans are all consolidated, then take a close look at utilizing one of the available income-driven repayment plans to never default again. But be forewarned, one of the new repayment plans, REPAYE, is a stinker if you are or ever plan to get married. See “Why REPAYE is Such a Horrible Student Loan Repayment Option.”
The only fact here that is immaterial is that you did not graduate from college. Unless your school defrauded you, graduating does not make any difference when it comes to repaying.
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If your financial situation is about to take you down to a deep hole that you cannot see your way out, then read Steve’s articles about filing bankruptcy to discharge your loans. There are two other helpful blogs you may want to look at… http://www.condemnedtodebt.org/ and http://www.unduehardship-povertyrequired.com/. I was being garnished for over 6 years and the amount they took from my social security and small Federal pension did not even DID NOT EVEN COVER THE INTEREST each month…. Gotta love the Dept. of Education’s brilliance!