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Borrower rights in wage garnishment for student loan collection

It can be confusing – even threatening – when a student loan borrower gets a collection notice that their wages will be garnished to repay the educational loan. Anyone who receives such a garnishment notice – which would mean their employer might be required to send part of the borrower’s earnings to pay the student loan balance – should know that these notices are not always accurate, may misstate the law and are sometimes misleading.

Student loan garnishment is unique 

When a creditor wants to garnish the borrower’s wages to repay a normal consumer debt (other than a student loan) in default, the creditor must first sue the borrower for a court finding that the money is owed before the creditor can take the next step of garnishing the borrower’s wages. If the borrower disagrees that the debt is owed or challenges the amount owed, they could raise these concerns in the court proceeding.

For a student loan, however, the government (or a loan servicer or debt collector it hires) can garnish wages for past due amounts without first getting a court finding that the debt is valid. In a reversal of roles, a borrower who disputes the debt must request a hearing before the U.S. Department of Education (DOE) in which they can assert their defenses and objections to the underlying student loan debt. Should the borrower be successful and prove they do not owe the money or that they owe less money, the creditor could not garnish an invalid debt or could only garnish up to the lower amount due.

Federal regulations set out procedures and rights 

Federal regulation requires that a federal student loan creditor send a specific notice of proposed garnishment to give the borrower time to request the hearing. The notice must give the borrower at least 30 days to do so and explain how. The notice also must explain the debtor’s legal rights such as the right to request the hearing, the right to a repayment plan, and the right to review and copy relevant records concerning the loan.

Creditor tactics 

Student loan creditors, unfortunately, all too often fail to comply with federal laws and regulations. For example, abusive debt collectors may:

  • Fail to give the required final notice of garnishment
  • Put pressure on debtors to agree to repayment plans by misrepresenting correspondence as being the final notice, when it is not
  • Withhold required information about how to dispute the debt
  • Threaten garnishment without notice of the debtor’s rights to induce the borrower to make decisions not in their best interests and without knowledge of their actual rights
  • Assert false information about the debt like the wrong amount or status

Remedies under federal law 

Student loan creditor actions like these may violate the Fair Debt Collection Practices Act (FDCPA). When creditor actions in violation of the FDCPA harm a student loan debtor, they can sue for money damages, declaratory relief, legal fees and court costs.

If you receive a notice of impending garnishment from a student loan debt collector, or if you have any other questions about your liability for student loan debt, you should consult an attorney to discuss your rights.