Student Loan Garnishment Process

[treehugger1]

For those of you with an interest in how the student loan garnishment process works, there is a Department of Education document link:

http://www.ed.gov/offices/OSFAP/DCS/Employers_Handbook.pdf

The handbook is for employers, but it provides clarity and insight into the process for the defaulted borrower.

31 U.S.C. Sec. 3720D. Garnishment is at the end of the handbook. Note that the stated section has language referring to 10% disposable wages. This was increased to 15% in the last decade.

[treehugger1]

More Info

The link to actions against defaulted student loans is here. I believe this only refers to those loans that fall under the category "guaranteed," but I'm not sure.

http://www.ed.gov/offices/OSFAP/DCS/default.html

[treehugger1]

I just discovered a slight "bend" in collecting student loans via wage garnishment. It appears that if the garnishment is not through the Department of Education, then the garnishment is limited to 10%. It appears that private holders of student loans are restricted to 10%. This might be of interest if a creditor were to attempt a general debt garnishment for 25% and fail to state it involves a student loan (attempting to garnish more than allowed by federal law). I'm not sure of the details.

I hope I'm not upsetting anyone by adding to my own post, but perhaps there folks out there who might find this information useful.

Cheers!

[havefaith]

Does the garnishment only apply to default before going into CH 13? We have about $50,000 in student loans that are in forbearance currently. We have meetings with attorneys next week and I'll ask, but if you know, would appreciate answer.. will we have to include the loans in the plan or outside? could part of the amount owed be discharged or do they always have to be paid back at 100%?
and when we say 100% is that without interest just based on principal owed?
Thanks a million!!!!!

[treehugger1]

I wish I had an answer for you but I do not. It seems that not all districts operate the same when it comes to 13 and GSL's. It was made clear to me after meeting with several attorneys two years ago that my GSL's would be forced into deferrment for five years, gathering the interest all the while. I'm an old guy so my loans are consolidated at 8.25% interest. Take $70K and compound this tye of interest for 5 years, and you'll know why I did not declare a BK. I would have gained the benefit of the automatic stay (collectors have to back off,) but I would have gained another $30K in interest on my GSL's. As far as I know, no part of GSL's are forgiven. By all means speak to some attorneys or others who have experience and solid evidence of how GSL's are considered in your district. If you make a LOT of money and are in a 100% payback plan, then you can probably argue to include the GSL payments on top of payments to other unsecured. I was borderline for this approach. It sounds as if you are doing the research. Good deal.

In a perfect world (in my opinion) GSL's would be considered a priority debt and payments subtracted from disposable income for "means testing."

[havefaith]

In a perfect world (in my opinion) GSL's would be considered a priority debt and payments subtracted from disposable income for "means testing."

I agree with you! thanks for your feedback.