Difficulty in paying off outstanding student loan timely is a common issue especially for the college graduates on a tight budget. When the payment towards the loan becomes significantly late, many private lenders request for a writ of garnishment from the learned court. And if it happens, then your current employer, by law, has to withhold certain amount of money from your paycheck. The amount will be forwarded to the learned court which consecutively pays the lender.
If you’re facing such a situation, here are the steps that can help you stop wage garnishment on existing loan, in spite of beliefs to the contrary.
- Pay off the loan on time – At the outset, you need to try paying off the loan. If you already have some savings or can manage to get a low-interest loan from your friend or relative, you can use the fund to pay off the existing loan in full. This definitely closes the account and you can stop wage garnishment. If you’re capable of pulling it off, you might wipe out your nest egg. But the interest-savings will be substantial over time, especially should you have some earnings on your savings. However, if this doesn’t work out, you may contact the lender.
- Negotiate for some alternative plans – Talk to the lender or someone from the company’s management team and discuss on an alternative plan. If you some plan in your mind, you can adhere to it and ask your lender to stop garnishment against a regularly scheduled payment plan or an amount of money which would be larger than the amount the lender is garnishing for. If the lender agrees with your plan, then ask them to sign off a written agreement.
- Pay a large amount as arrear – If you want to pay some amount of money as arrear, try to make it in full. If the lender won’t swap a simple payment plan offered by you for stopping garnishment, ask them to provide you with the amount representing the total of skipped monthly payments.
- Refinance your loan – You will find a number of lenders that specialize in purchasing distressed students’ loans or refinance existing student loan taken from banks or other lenders. If your lender doesn’t budget, then you just apply for a loan from another lender. The new loan would pay off your present account and stop the garnishment and you can start with a new lender. Moreover, you may qualify for a better interest rate and more reasonable terms with them.
- Appeal before the court – In case your present lender doesn’t want to work with you, you may contact a student loan attorney and ask him to file a ‘Claim for Exemption’ form with the learned court. On the form, you need to list your monthly expenses, gross income, dependents and a reasonable explanation of why and how the wage garnishment is damaging your financial capability to run the family. After the form is filed, the attorney is likely to schedule a hearing date on which he will explain your situation to the judge.
Discussed above are some the most important steps following which you can avoid wage garnishment owing to nonpayment of student loan. Remember not to disregard any letter, email or phone call from your lender.
Marie is a professional blogger, who covers a variety of topics including make money, stock market, loan, debt, bankruptcy, budgeting, binary options brokers in USA, retirement investment and she has been writing for the last 5 years.