Mariah Patterson •
After a long pause on federal student loan payments and a series of relief efforts, the tide is turning. The new administration is making a significant push to resume the collection of all outstanding student loan debts, which includes wage garnishment for borrowers in default.
So, what does this mean for you?
After a long pause on federal student loan payments and a series of relief efforts, the tide is turning. The new administration is making a significant push to resume the collection of all outstanding student loan debts, which includes wage garnishment for borrowers in default.
So, what does this mean for you?
If you are in default on your federal student loans, the government can take up to 15% of your after-tax income.
Let’s break it down with an example:
If you are an independent contractor receiving 1099 income, wage garnishment is trickier to enforce. Since there’s no employer to withhold wages, they can't garnish your paycheck in the same way. At least, not immediately. The government can still pursue other collection tactics, such as seizing tax refunds or pursuing legal action.
Later this fall, the Treasury Department plans to send notices to over 5.3 million defaulted borrowers. If you are one of them, here’s what to expect:
If you are facing financial hardship, recently filed for bankruptcy, or are currently unemployed, you may be protected. Borrowers have the right to challenge wage garnishment if it would create an undue burden.
If you are at risk, now is the time to act. Request a hearing, explore repayment options, or look into income-driven repayment plans that could help bring your loans out of default.
Let’s break it down with an example:
- You earn $500 a week after taxes.
- The government could garnish $75 per week, leaving you with $425.
If you are an independent contractor receiving 1099 income, wage garnishment is trickier to enforce. Since there’s no employer to withhold wages, they can't garnish your paycheck in the same way. At least, not immediately. The government can still pursue other collection tactics, such as seizing tax refunds or pursuing legal action.
Later this fall, the Treasury Department plans to send notices to over 5.3 million defaulted borrowers. If you are one of them, here’s what to expect:
- You'll receive a 60-day notice before garnishment begins.
- This notice includes information on how to request a hearing before an administrative law judge if you want to dispute the garnishment.
- If your wages are being garnished, your employer will receive a garnishment order.
If you are facing financial hardship, recently filed for bankruptcy, or are currently unemployed, you may be protected. Borrowers have the right to challenge wage garnishment if it would create an undue burden.
If you are at risk, now is the time to act. Request a hearing, explore repayment options, or look into income-driven repayment plans that could help bring your loans out of default.
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