Defaulted loan holders typically face wage garnishment, if the debt is left unresolved. In most cases of student loan garnishments the lender was unable to contact the borrower. Wage garnishment can be financially and personally detrimental. An individual must be proactive to avoid or stop the garnishment process.
#1 KNOW YOUR RIGHTS
There are laws that protect the borrower’s rights in these types of situations. If you are being threatened with wage garnishment, you should review the laws to make sure you know your rights. Most importantly, you cannot be discharged (terminated) from work if you face student loan wage garnishment. Some employers do not look favorably on employees facing this type of financial punishment, but they are not legally allowed to release you for this reason. There are federal guidelines that limit the amount of wages that can be garnished in a given week. the Debt Collection Improvement Act of 1996 permits the Department of education to garnish up to 15% of disposable pay. This is a calculated amount after taxes. If this will cause a financial hardship you should challenge the garnishment. If an individual successfully proves that they are financially incapable of surviving because of their student loan garnishment, they should be able to work out a more affordable arrangement with the lender.
#2 ANSWER YOUR PHONE AND RESPOND TO THE COLLECTION ATTEMPTS
If you have a defaulted debt, whether to a private lender or the government, you should respond to their attempts of trying to contact you. When you ignore collection attempts, you are telling the lender you are not willing to resolve this debt voluntarily. You will not have to pay all of your student loan immediately, and you do not even have to cooperate with a collections agency. If you are contacted, simply respond with a request to verify the debt. If you are unsure of the debt it is okay to request a copy of the promissory note (Copy of the contract with your signature and date). Requesting this will typically take the collection agency 2-3 weeks to get the information together. Doing so will force the collections agency to stop attempts to collect until they have provided you with written verification, giving you time to deal with the situation. Remember a genuine dispute is a genuine dispute…
#3 ESTABLISH A FORMAL ARRANGEMENT
Even though your options may be limited, most lenders, including the government, want you to pay your debt instead of going into bankruptcy of ignoring the debt. This opens a window for you to negotiate a payment plan. The Dept of Education will even consider a payment plan if you can show you do not have the funds to meet your current obligations. Especially in this bad economy, if you have lost hours at your job or if you have suffered a fiscal emergency, you will find lenders hoping to work with you to avoid the problem of garnishment. If the student loan garnishment is causing financial hardship to you and your family, this is a valid reason to challenge your student loan garnishment. With the necessary proof and the presentation of documents there is a good chance that you might be able to stop student loan wage garnishment.
It would be a good idea to pay voluntarily considering that the student loan garnishment will typically continue until the balance is paid in full. The sad part about a garnishment is the fact that 80% of your student loan garnishment will go towards the interest and 20% will go towards the collection costs. The saddest part comes from the fact that majority of the collection fees could be waived if done right…..
Other important challenges include:
-You were involuntarily terminated from last employment and have been employed in current job for less than 12 months,
-You have repaid the loan,
-It is not your loan or there is some other reason why you do not owe the money,
-You have already entered into a repayment agreement and are making payments,
-You have filed for bankruptcy and the case is still open or the loan was discharged in bankruptcy,
-The school failed to pay you an owed refund,
-The borrower is dead or totally and permanently disabled,
-The loan is not enforceable, for example because of forgery, or
-You are eligible for a closed school or false certification discharge.
By: Mr. K The Rogue Student Loan Collector