Are you behind on your student loan payments? Here’s how much can be withheld from your paycheck

What next for student loan borrowers? Repayments on student debts were halted in March 2020, at the start of the pandemic, and have only recently been restarted by the Trump administration.

There are currently around 43 million people with student loan debts in the United States. In total, they owe more than $1.7 trillion in outstanding debts.

It’s thought that around 5 million of those borrowers are now in default, meaning that they have failed to make a payment for more than 360 days. With another 4 million in late-stage delinquency, the student loan situation is now at crisis point. For some, this could mean losing a proportion of their wages in a process known as ‘garnishment’.

Garnishment is a mechanism that allows lenders to unilaterally take some of the outstanding debt amount from the borrowers’ wages.

Last month the Education Department threatened millions of borrowers with wage garnishment, adding that wage garnishment notices will be sent out this summer. The law requires that lenders give 60 days notice before extracting money from wages but it leaves the borrower with little legal recourse.

As it stands, lenders are able to garnish up to 15% of a borrower’s disposable pay. However they must also leave a minimum of 30x the federal minimum hourly wage, which would be $217.50 per week. Even if you live in a state with a higher minimum wage, it’s the federal figure that will be applied.

That’s not even the full extent of the garnishment tools that the lenders can access. To claim back payment for loans that are in default, lenders can also seize tax refunds, Social Security payments and disability benefits.

In some instances it is possible to block this garnishment process by claiming that it would cause financial hardship. However the best course of action in many situations is to request loan rehabilitation, which involves making nine timely payments in full within a 10-month period.

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