Your wages are being garnished for a defaulted student loan. You need it to stop. Here’s how to stop an administrative garnishment quickly.
You’re looking at your paycheck. It’s short. There’s a garnishment. You don’t know what you’re being garnished for so you call HR. The HR rep tells you the garnishment is for a defaulted federal student loan. You’re not sure what to do but you know you need it to stop. You google: How to stop an administrative wage garnishment. Now you’re here.
Let me tell you exactly what you need to do to stop the student loan garnishment quickly.
How to stop an administrative wage garnishment once it starts
You have at least 5 options to stop an administrative wage garnishment once it starts:
- check to see if you’re eligible to be garnished
- object to the garnishment as a financial hardship;
- rehabilitate your student loans;
- lift the garnishment by making voluntary payments; or
- temporarily stop the garnishment by filing bankruptcy.
- Student loan consolidation isn’t an option.
That’s because you can’t consolidate a loan if the collection agency is already garnishing your wages for that loan. You’ll have to wait until your garnishment is lifted before you can consolidate.
1. Stop an administrative wage garnishment for student loans because you were fired
In the last year before the garnishment started, were you fired or laid off from a job?
If so, you can stop the garnishment.
What you have to do is this:
Request a hearing using the hearing request form. Check the box that says you’ve been involuntarily terminated from your last job and have been employed in your current job for less than 12 months.
You have the burden to prove that you were involuntarily terminated and that you’ve been at your new job for less than 12 months. So make sure you attach proof. An example of proof would be a letter from your former employer showing you were involuntarily terminated and letter from your new employer showing your start date.
2. Argue the student loan wage garnishment causes financial hardship
You’re basically living check to check.
Your budget doesn’t allow for shortages.
But when that garnishment hit, that’s exactly what happened: Shortages.
Here’s what you do:
Argue the garnishment causes you and your family a financial hardship.
You’ll make this argument when you request a hearing using the hearing request form.
In that form, state two things:
- Why the garnishment causes you a financial hardship and
- How your financial situation have substantially changed since you first got notice of the garnishment
If you don’t argue both of those things, you must wait until your garnishment order has been outstanding for 6 months before you can request a hearing.
Financial hardship definition for student loans
Financial hardship means you can’t meet the basic living expenses for goods and services necessary for the survival of you and your dependents. The hearing officer will compare your expenses against the amounts the IRS says should be spent for basic living expenses by families of the same size and similar income to yours. If the expenses you claim are greater than the IRS amounts, you must prove the amount you claim is reasonable and necessary.
Related: The IRS National Standards for Allowable Living Expenses for 2016
Examples of substantial change in financial situation
The examples of what’s considered a substantially changed financial situation are pretty limited. Basically, your financial situation has substantially changed if after you got notice of the garnishment you suffered an:
- divorce or
- catastrophic illness
Once you include both these arguments, submit the hearing form to:
US Department of Education
Attn: AWG Hearings Branch
PO Box 5227
Greenville TX 75403-5227
The Department will usually decide whether to grant your request within 60 days.
Your objection should be granted if you show that you’ll be unable to meet your own basic living expenses and those of your dependents.
Unless the review takes longer than 60 days, the Department will keep garnishing your wages while it reviews your request.
3. Rehabilitate your loans to stop a student loan garnishment
If you contacted the private collection agency whose garnishing you, they probably tried to get you to rehabilitate your loans.
Rehabilitation does two things:
It stops the garnishment and gets you out of default.
But rehabilitation takes time. You rehabilitate your defaulted loans by making 9 monthly payments within 10 months. This means you can miss one payment and still qualify for rehabilitation. Here’s the catch though, while you’re making those monthly payments, the garnishment continues. You’ll keep getting garnished for at least 5 more months.
After you make your 5th payment, your garnishment should be suspended. It will be reactivated, however, if you don’t complete the rehabilitation program.
NOTE: Do not file your taxes if you’re rehabilitating your loans. The Department of Education can still take your refund if your loan remains in default. Wait until you complete the rehab program and your loan is out of default before you file your taxes. Request an extension if need be.
4. Ask the garnishment be lifted
Here’s the thing:
Yes, asking the collection agency to lift your garnishment is an option.
It’s just usually not a viable option.
I’ve never seen it done.
But that doesn’t mean it won’t work for you.
So ask. The worst they can do is say no.
And if they do say no, ask if they’re willing to subtract your payment from your garnishment amount. That way you won’t pay more than what’s being taken by the garnishment.
5. File a chapter 7 or 13 bankruptcy to stop an administrative wage garnishment
My experience is that if the other options fail, filing bankruptcy to stop an administrative wage garnishment makes a lot of sense.
Let me explain.
When you file bankruptcy, your garnishment must stop. You see, filing bankruptcy triggers what’s called the automatic stay. The automatic stay is basically a shield that temporarily protects you from creditors. While that shield is in place, you should have time to catch your breath so you can get your financial life in order.
At least that’s the hope.
Another benefit is that at the end of your bankruptcy case — about 3 months for a chapter 7 and about 3 to 5 years for a chapter 13 — most of your debts will be discharged. Of course, you’ll still have to pay back your student loans. But you theoretically should have more money left over to pay towards your student loans because you will have gotten rid of your other debt.
One other option is that filing bankruptcy gives you a chance to get rid of your student loans for good. What’s the harm in trying? If you fail, you owe loans you would owe anyways. But if you win…
Now don’t be mistaken:
Getting your student loans discharged is hard to do.
Some judges are reluctant to grant you a discharge.
And if that weren’t bad enough, the procedures for filing an adversary proceeding are many.
Stanley Tate is one of the only attorneys in the US who focuses his practice on helping people with their student loans. Since starting his own firm, Stanley has helped people across the nation get out of default, lower their monthly payments, cut their interest rates, and settle their student loans for pennies on the dollar. His goal is simple: give you a plan that helps you lead the life you want.
Stressed out over your student loans? Make sure you register for our Student Loan Masterclass.
We’ll be covering:
- What to do if you can’t afford your loan payments
- How to negotiate a student loan payment that works for your budget
- How to determine who you owe and how much
- Your rights as it pertains to your student loans and the common illegal practices servicers engage in
- How to stop garnishments (Before it starts and after it starts)
- How your marital status affects your loans
- Whether consolidation is the best option for you and who you should consolidate with.
- How to pay your student loans off as soon as possible