What Can I Do to Avoid Garnishment if I Default on My Student Loans?
Since the U.S. Department of Education insures Stafford, Perkins and Federal Parent Plus loans, the garnishment procedures for these student loans are different from loans through a bank or lending institution. Unlike student loans through banks, the U.S. Department of Education does not have to sue you and receive a judgment in their favor before garnishment proceedings begin.
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Federal Student Loan Garnishment Notice
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Once you default on a federal student loan, you will receive a notice of the Department of Education's intent to begin garnishing your wages through an Administrative Wage Garnishment or AWG. You then have one month from the date on the notice to object to the garnishment or negotiate a repayment plan. If you do not respond, garnishment of your wages begins approximately 30 days after the date on the notice.
Repayment Plans
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When a federal student loan goes into default status, the U.S. Department of Education's AWG division services the account, or the department sells it to a private collection company. In either case, you have the opportunity to avoid garnishment by contacting whoever is handling your account and working out a voluntary repayment plan. You have 30 days from the date on the garnishment notice to work out a repayment plan. It is important to remember that the 30-day period begins on the date of the notice and not on the postmark date or the date you receive the notice.
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Non-Federal Student Loan Garnishment
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When you default on a non-federal student loan, the lender or collection agency must first sue you in court for the balance of the loan before it can begin garnishing your wages. This process begins with a Request and Writ for Garnishment. To avoid the garnishment, you have to contact the creditor listed on the garnishment request and make payment arrangements. It is important to note that there are no laws that require a creditor to accept payment arrangements. Should the creditor refuse to do so, the garnishment will begin shortly after the court date listed on the garnishment request.
Forms to Stop Garnishments
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You can also file a Motion to Quash a Writ of Garnishment or a Claim of Exemption to avoid a wage garnishment from non-federal defaulted student loans. These options do not apply to federal student loans because the Department of Education does not have to sue you to begin wage garnishments. When you file a Motion to Quash a Writ of Garnishment, you are asking the judge to cancel the garnishment order because you do not believe the creditor has the legal right to sue you for the debt. When you file a Claim of Exemption, you are asking a judge to cancel the garnishment order because your income derives from regular Social Security, worker's compensation or unemployment payments, all of which are exempt from garnishment.
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