Student loan wage garnishment: how it works and how you can stop it

When you do not make payments on your student loan debt for long enough, your loan servicer may take another route to get back the money you owe. One of these avenues is seizing your wages, also known as wage garnishment.

Since the pandemic, wage garnishment for federal student loan debt has been off the table, offering borrowers some protection. Soon, however, the practice is expected to restart. “In a new U.S. Department of Education memo obtained by CNBC,” it was revealed that “garnishments may resume — in some cases, as early as this summer,” said CNBC. This will mean that for “the first time in roughly five years, borrowers who have defaulted on their federal student loan debt will face collection activity, including the garnishment of their wages.”

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Federal student loan wage garnishment: You will need to have “missed nine months of payments for federal loans before the government can garnish your wages,” said Bankrate. “Your servicer does not need to take you to court to begin garnishing,” and they can garnish “up to 15% of your disposable income to repay federal student loans.” The practice can continue “until your loan balances plus interest and fees are paid back,” or “if your loan is removed from default.”

Private student loan wage garnishment: Private student loans can enter default much sooner, “after just one missed payment,” but your lender “first must sue you and win a court judgment” before they can garnish your wages, said Experian. How much they are allowed to garnish “depends on the state where you live,” but it could be up to “25% of your disposable income” in “some states,” said Investopedia.

Of course, that may not always be feasible. If you have federal student loans, you might consider entering an income-driven repayment (IDR) plan, which “provides a way to extend your repayment term and limits your monthly payment amount to a percentage of your income,” said Experian. For private student loans, you will need to ask your lender about the availability of different payment plan options.

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