In the event of a federal student loan borrower’s default on a federal student loan, the Department of Education has the power to garnish the borrower’s wages without first having to go to court as is the case with most other debts. Under the administrative wage garnishment, the government orders the borrower’s employer to withhold up to 15 percent of the borrower’s disposable income. The garnishment will continue until the defaulted loan is paid in full or taken out of default.
Defaulted borrowers are allowed an exemption equal to 30 times the minimum wage. The current federal minimum wage is $7.25 per hour – (30 x 7.25 = $217.50 exempt per week).
Borrowers have some rights with regard to administrative wage garnishments:
- 30-days advanced notice from Department of Education or guaranty agency in the case of a commercially held FFEL loan before the garnishment begins;
- Notice of the borrower’s right to inspect and copy records relating to the loan, and the right to object to the garnishment;
- Notice of the borrower’s right to avoid garnishment by voluntary repayment;
- An opportunity to enter into a written agreement under terms agreeable to the Department of Education to establish a voluntary repayment agreement;
- An
opportunity for a hearing to present and obtain a ruling on any objection the
borrower has to the existence, amount, or enforceability of the loan,
- that garnishment of 15 percent of the borrower’s disposable pay would produce an extreme financial hardship; or
- an objection stating that garnishment cannot be used at this time because the borrower has 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 the employer if the employer discharges, refuses to hire, or takes disciplinary action against the borrower based on the garnishment action; and
- Not have any information provided to the employer regarding the garnishment other than what is necessary for the employer to comply with the withholding order.