How Will the Government Tell My Employer My Student Loan Garnishment Is Paid in Full?
When you default on a federal student loan, the U.S. Department of Education does not have to obtain a court order before it can begin garnishing your wages. The Department must only first notify you and your employer before the garnishment is to begin. Another common way the government collects on defaulted student loans is to garnish your federal and state tax refunds.
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Default Consequences
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When your student loan goes into default, you are no longer eligible to receive any type of federal financial aid for school. Once you pay off your debt, the U.S. Department of Education reinstates your financial aid eligibility. Having a defaulted student loan can also prevent you from renewing your professional license. If you currently hold a license to practice your profession in your state and have a defaulted student loan, the government can rescind or disavow your current license.
Garnishment Process
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Approximately 30 days before the garnishment begins, the U.S. Department of Education will send you a letter notifying you of the garnishment. During this time, you can choose to contact the Department to either pay your loan in full or work out a payment plan to bring your student loan out of default. Doing so prevents the Department from garnishing your wages as long as you stay current on your payments. If you do not work out a payment arrangement within the given time, the garnishment begins. The maximum amount of this type of garnishment, called an Administrative wage garnishment, is 15 percent of your after-tax income.
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Employer Compliance
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Along with the garnishment order, you employer receives a certification from the Department of Education. In this certification, your employer must provide the Department with all requested wage and contact information. If your employer refuses or fails to complete the certification within the given time or fails to take the garnishment out of your paycheck, the U.S. Department of Education can sue your employer for the garnishment amount.
Garnishment Termination
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Once you pay off the entire amount of your student loan, including principal, interest and applicable fees, the U.S. Department of Education sends your employer a Notice of Cancellation of Order for Withholding Wages. Once your employer receives this notice, it is to stop garnishing your wages. If for some reason your employer deducts your garnishment amount after the receiving the notice, you will receive a refund for the amount from the U.S. Department of Education.
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