Stop student loan wage garnishment with these 3 tips

Student loan wage garnishment can be avoided if borrowers pursue other options. (iStock)

Student loan wage garnishment occurs when consumers default on a student loan, one that is usually nine months past due.

This is a legal process that is used to collect money owed on a defaulted student loan. Up to 15 percent of each paycheck can be deducted by the government to repay defaulted federal student loans through this process, said Bruce McClary, spokesman for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization.

Consumers can avoid wage garnishment for a federal student loan by working with the servicer to rehabilitate the loan either through consolidation or a qualifying affordable repayment program, he said.


“If a notice of garnishment has already been received, there is a 30-day window where you can have time to file an appeal for a chance to work out alternative arrangements with the agency in charge of collecting the debt,” McClary said.

Student loan wage garnishment is a measure executed by the U.S. Department of Education. A portion or all of your federal tax refund can also be withheld by the U.S. Department of the Treasury. This can be problematic if you were counting on the money for other purposes such as paying down your credit card debt.

Here are some other tips to avoid going through the process and what to do if you are already experiencing student loan wage garnishment.

1. Refinance your loans.

Private student loans have variable rates and your monthly payments can rise when interest rates increase.

There are a plethora of credible student loan refinancing companies said Chris Osmond, chief investment officer at Prime Capital Investment Advisors. Always shop around to find the best interest rates and repayment options. A shorter loan period means you can save thousands of dollars in interest.


“Why not take advantage, especially in this historically low-interest environment where some of these providers are offering lower interest rates?” he said.

2. Make more than the minimum payments.

Too many consumers make only the required monthly minimum payments, which is frequently applied to the interest portion and hardly touches the original amount that you borrowed. This means very little of your payment is going towards the principal portion of your loan, which is the initial amount that you borrowed.

“Interest is one of the largest obstacles to paying off loan balances,” Osmond said.  “Any reduction in the interest charges allows a quicker loan payoff.”

3. Consolidate your debt.

Consider consolidating your student loans because it enables consumers the “opportunity to make similar or even larger payments toward the principal, which may serve as a long-term benefit,” he said. “Consolidation can enable borrowers to get their loans back in good standing and save their credit. Additionally, you can extend the repayment period while potentially reducing payments.”

If your wages are already being garnished, you still have a chance to rehabilitate their federal student loan and stop the deductions coming out of your paycheck, McClary said. 

“Success depends on your capacity to make at least nine consecutive loan payments at the originally agreed amount over a period of ten months,” he said. “If you can accomplish that, your loan will no longer be listed in default. Even better is the fact that your fifth consecutive payment will stop the wage garnishment.”