Wage garnishment on a student loan puts you in a seemingly hopeless position. You work hard to earn a living, but you can never seem to get ahead. While you expect your income to cover life’s essentials, a portion is applied to past due student loans before you ever see it. If you can’t pay your current bills, the vicious cycle may continue well into your future. Fortunately, there are options to stop or curtail student loan wage garnishment, but you may have concerns about the complications and consequences.
At Luftman, Heck & Associates, our Ohio student loan lawyers are dedicated to helping people who have fallen behind on payments and need practical advice on stopping a garnishment. No magic wand can make student loan debt go away, but there are wise, workable alternatives to addressing your situation.
Contact LHA at 888-726-3181 to schedule a free consultation and learn how we can help. You may also find it helpful to review some strategies to stop student loan wage garnishment.
Four Ways to Stop Student Loan Garnishment
1. Consider Loan Consolidation or Refinancing
1. Consider Loan Consolidation or Refinancing
Depending on the status of your wage garnishment, you may look into consolidating or refinancing your student loans. While both combine student loans, they are actually distinct options depending on the type of student loans involved and your specific situation. A Direct Loan Consolidation only applies to federal student loans like Direct or FFEL programs and will not lower your interest rate. Instead, your average interest rate is rounded up to simplify and /or extend your repayment term. This is can be an appealing option if you want to make one monthly payment or if you want an income-driven payment plan. Refinancing can include both federal and private student loans, where a private lender creates a new loan and could involve a lower rate and monthly payment based on your credit score and income level.
There are befits and drawback to either depending on your loan type and circumstances, but if you’ve received notice but garnishment has not already started, consolidating or refinancing your loans can group all of your student debt into one loan. The result is a fresh loan with new terms and conditions, and being removed from default status. With a refinanced or consolidated student loan, you’re considered to be in good standing, so the potential wage garnishment ceases. If one of these options suits you, it’s essential to act quickly. The consolidation and refinance process can take several weeks, during which wage garnishment may move forward.
2. Sign Up for an Income-Based Repayment Plan (IBR)
If you have federal student loans, you may be able to stop student loan wage garnishment by working out an IBR. The focus is on how much you make instead of how much you owe and, if you qualify, there are multiple benefits:
- You will pay based upon your discretionary income, which cannot exceed 10% for loans taken after July 2014 and 15% for loans before that date;
- In some situations, your reduced IBR payments may not cover the interest on your loans. If that’s the case, you may qualify to have the U.S. Department of Education pay the interest on your loan for up to three years. After this time and for other loan types, the interest will continue to accrue and be added to the total amount owed;
- While your total debt may grow if your payments are low enough, IBR plan also includes loan forgiveness when the repayment period expires, which could be 20 to 25 years depending on when to sign up for the loan. If you make monthly payments, in full and on time, your loan is completely discharged after the relevant repayment term. It’s important to keep in mind that any forgiven loan balance may have tax implications.
3. Rehabilitate Your Federal Student Loans
This option is a way to fix your student loans, get them out of default status, and stop student loan wage garnishment. Under this arrangement, which is only applicable for federal loans you’re required to make nine monthly payments over 10 months at a rate based upon your discretionary income. If your wages are already being garnishment, the amounts will cease being taken out after five on-time payments. Therefore, for the first few months, you’ll be paying the rehabilitation amount plus the existing wage garnishment.
4. Assess Options Regarding Bankruptcy
There’s a misconception that you can’t discharge student loans in bankruptcy, and it’s true that this is very difficult to do. However, it may be possible if:
- You’re unable to maintain a reasonable, minimum standard of living, given your current income and expenses;
- It’s not likely that your financial situation will improve during the term of your loan; and,
- You’ve made efforts to pay back the amounts you owe.
Not everyone will qualify based upon these factors, so bankruptcy may not resolve your wage garnishment situation. Plus, bankruptcy has long-term, serious consequences which make it a drastic step for someone with their whole financial future to consider. Once you understand the laws and how they apply to your circumstances, you may consider one of the other options listed above.
Contact an Ohio Student Loan Lawyer for Advice
If you’d like more information on ways to stop student loan wage garnishment, please contact Luftman, Heck & Associates.
You can reach our firm to set up a free, initial consultation by calling 888-726-3181 or submit an online request. There are multiple alternatives available, but you’ll want to make sure you find the right fit for your circumstances. Our Ohio student loan lawyers can advise you on your options and help you take control over your debt.