The U.S. Department of Education announced it will postpone wage garnishments for delinquent student loans.
The move, announced Friday, reverses the department’s previous plan to gradually restart wage garnishment for groups of borrowers and will give the agency more time to finalize new repayment plans.
Wage garnishment could affect millions of people who are 270 days or more past due and have a significant impact on Black borrowers. Black students are not only more likely to rely on loans to pay for college due to persistent racial inequality. They are also more likely to have difficulty repaying loans once they enter the labor force.
The shift reverses previous plans to restart wage garnishment this month after a pause during the pandemic. In December, the agency announced it would begin garnishing the wages of borrowers who defaulted, the latest blow to the education community.
In November, the Trump administration said it would shift certain responsibilities and programs — including those supporting low-income districts and historically black colleges and universities — away from the Department of Education in an effort to “break up the federal education bureaucracy.”
Last July, the U.S. Supreme Court allowed the agency to proceed with the mass firings, although the issue is still being litigated in lower courts. Black workers are disproportionately represented in the federal workforce and have therefore been disproportionately affected by layoffs.
The agency has not set a new date for involuntary collection. The delay will give borrowers time to evaluate new repayment plans scheduled to begin on July 1, the company said.
Here’s what you need to know if your student loan is in default.
When does wage garnishment begin?
The department must give borrowers 30 days’ notice before it can begin garnishing their wages. These notices cover how borrowers can resolve delinquent loans and seek a hearing to challenge the decision to garnish wages.
How much can the government withhold from my paycheck for student loans?
The government can garnish up to 15% of a borrower’s disposable wages.
What repayment plans are available to avoid default?
Borrowers who are not in default but are at risk of defaulting on their loans can avoid defaulting on their loans by participating in repayment options.
There are a variety of income-driven repayment plans available, including income-based repayment (IBR), income-determined repayment (ICR), and pay-as-you-earn (PAYE). Extensions or reprieves may also be possible in certain circumstances.
Stanley Tate, an attorney who specializes in student loan law, told Capital B that a common theme he observes is that many borrowers default not because of a lack of options, but because they don’t know which programs they qualify for and how to enroll in them.
Is there legislation to stop or suspend wage garnishments?
Tate said there is currently no legislation that would broadly stop or suspend federal student loan wage garnishments.
What happens if I don’t respond to the garnishment notice?
If a defaulting borrower takes no action, a garnishment occurs. Employers will withhold up to 15% of borrowers’ wages. The money is sent to the government. The law requires borrowers to keep at least 30 times the federal minimum hourly wage, or $217.50, per week.
What rights do borrowers have if they face garnishment?
The borrower must be notified 30 days before the garnishment begins. Additionally, they have the right to request a hearing and pursue options such as consolidation or rehabilitation to resolve the breach, Tate said.
“From a practical perspective,” he added, “the key right is the ability to stop the garnishment by exiting the default before wages are garnished.”
How will garnishment affect a borrower’s financial stability?
Especially for low-income borrowers, a 15% wage garnishment is significant. That could have a significant impact on their ability to pay rent, transportation, child care, health care and other needs, Tate said.
What makes this period particularly difficult, he noted, is that many of these borrowers may qualify for income-driven repayment plans, which require much smaller payments — sometimes far less than what would be collected through garnishment.
“In this sense,” Tate said, “seizures often reflect a breakdown in communication and contact rather than a lack of repayment options.”
This story has been updated.
Student loans put on hold after wage garnishment. What borrowers need to know. appeared first on Capital B News.
