Can the Government Garnish My Wages to Pay My Student Loan Debt?

Can the Government Garnish My Wages to Pay My Student Loan Debt?

Last updated: October 2011

The following questions were submitted to John Roska, an attorney/writer whose weekly newspaper column, "Q&A: The Law," runs in the St. Louis Post-Dispatch (Illinois Edition) and the Champaign News Gazette. This article was published on August 31, 2011.

Question:

My employer told me they got something requiring them to garnish my wages for an old student loan. Don’t they have to take me to court first? Is there any way to stop the garnishment?

Answer:

Most wage garnishments require a court case. But not when you owe the federal or state government. The law makes it easier for them to collect from you.

The Illinois Student Assistance Commission (ISAC) is our state’s designated collector for many federal student loans. The federal rules that ISAC must follow allow them to do an “administrative” wage garnishment that doesn’t require any court case.

“Regular” creditors, like credit cards and banks, have to sue you in court, and get a judgment against you, before they can try to garnish your wages. Then, under Illinois law, they can’t garnish anything unless your take-home pay is more than $371.25 per week.

The federal rules trump Illinois law, and provide less protection. In an administrative garnishment, they let ISAC garnish either: 15% of your “disposable pay,” or your “disposable pay” over $217.50 per week—whichever is less.

That $217.50 is 30 times the federal minimum wage of $7.25 per hour. That’s much less than the 45 times our state’s $8.25 per hour minimum wage that Illinois protects. So, administrative garnishments start when your net’s over just $217.50 per week, not that $371.25.

“Disposable pay” to ISAC is your total gross pay, minus deductions required by law (taxes, Social Security, and Medicare), and any health insurance premiums. Allowing the deduction for health insurance in calculating net pay for a garnishment is about the only thing that’s better about the federal rules.

Take, for an example, gross pay of $375 per week, and “disposable pay” of $300. ISAC’s administrative garnishment to repay your old student loan debt would get $56.25 per week. That 15%-of-gross is less than the net-over-$217.50 ($82.50). In a court case, under Illinois law, a “regular” garnishment would get nothing

At least 30 days before an administrative garnishment begins, you’re supposed to get a written notice warning you that it’s coming, and offering a chance to avoid it with a payment plan. Once the garnishment begins, it’s probably too late for a payment plan.

That 30 day notice is also supposed to say that if you’d previously been involuntarily unemployed, you can’t be garnished unless you’ve been back to work for at least 12 months. The notice must also notify you of your right to request a hearing, to dispute or correct what you owe, and to request a hardship exception. By documenting that a garnishment would create a financial hardship for your family, you can reduce or stop the garnishment.

You might be able to stop the garnishment by replacing your old loan with a new loan under the Federal Direct Loan Program. If your income’s low enough, your “payments” on the new loan can be $0. A new loan also stops tax refunds from getting intercepted. For more information, call 800-557-7392, or go to www.ed.gov/directloan.
 

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