Unfortunately the growing number of students who have graduated college with student loan debt they cannot repay has sky-rocketed. In fact, according to Fox News, there are currently $1.11 trillion in student loans outstanding and $121 billion of them are 90-plus days delinquent or in default.
With the government getting too involved in the loan application process, more students having easy access to loans, and colleges having no incentives to keep the costs low, the price of college has risen dramatically over the last 20 years.
Recently on our legal forum a user asked, “If I have student loan debt that I cannot repay what will happen? Specifically, if I am receiving child support payments from the father of my children can the government legally take those payments if I default on my student loan obligations?”
If you have overdue student loan debts the U.S. Department of Education or any other collecting agency collecting student loan debt can garnish certain types of wages without getting a court judgment. Federal law limits the amount to 15% of your disposable or less than 30 times the minimum wage. This garnishment is referred to as an administrative judgment.
Now, the good news is that there are certain types of wages which are protected from creditors, which means they are “exempt” and cannot be garnished. Wages which cannot be garnished include (but may not be limited to) SSI benefits, TANF benefits (state welfare), and child support benefits you receive.
There is, however, a catch. We are specifically addressing a wage garnishment. If the money gets deposited in the bank and gets co-mingled with other funds there is no guarantee that a creditor will not get a bank account levy and take money which has been deposited in your bank account.
Although it is likely student loan debt issues will, at some point, have to be dealt with at a federal level, we are not quite there. With that in mind, if you have student loan debts it’s time to decide what to do. There may be several options to reduce your monthly payments, establish better money management solutions, or determine if you qualify for some type of modified repayment plan.
If you can prove undue hardship there are several options for repayment including the Contingent Repayment Plan (ICRP), the Income Sensitive Repayment Plan (ISRP), the Income Based Repayment Plan (IBRP), or the Hardship Repayment Plans for Perkins Loans.
In other cases you may be able to consolidate your student loans into a single loan, talk to the government about restructuring your debt payments, getting a forbearance (which allows you to temporarily delay repayment), or defer your student loan for a time.
There are very few situations which allow students to completely eliminate their student loan debts. For example, options may be available if your school closed while you were there or within a specific time period, you withdrew from school and the school did not refund your money, you become severely disabled after graduation, or you die.
Filing bankruptcy may also be an option, but there are very specific requirements you must meet for a college loan discharge.
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