Wage garnishments on student loans

One of the partners of the firm that I intern at asked me to do some research on wage garnishments on student loans. This was a big opportunity for me. Anytime that I can help out a partner is a chance to prove myself and worth.

The partner wanted me to research whether it was legal for a loan company to put a wage garnishment on a person without having a court order. The official notice that we received sure made it seem like it was legal. It stated that the debt was from a student loan that was disbursed by a federal contractor and that made it legal.

After some internet researching, I found out that it is indeed legal for a federal contractor who provides student loans to garnish without a court order. From the U.S. Department of Labor’s website:

“The Debt Collection Improvement Act authorizes federal agencies or collection agencies under contract with them to garnish up to 15% of disposable earnings to repay defaulted debts owed the U.S. government. The Higher Education Act authorizes the Department of Education’s guaranty agencies to garnish up to 10% of disposable earnings to repay defaulted federal student loans. Such withholding is also subject to the provisions of the federal wage garnishment law, but not state garnishment laws. Unless the total of all garnishments exceeds 25% of disposable earnings, questions regarding such garnishments should be referred to the agency initiating the withholding action.”

The SEC’s website¬†also notes that there was a rule change that allows these garnishments to occur without court orders. So, I found two reliable sources that confirm wage garnishments on student loans can take place without court orders. I sent my findings to the partner and he was very pleased. It felt really nice when he thanked me through email and then in person.


http://www.dol.gov/whd/regs/compliance/whdfs30.htm
https://www.sec.gov/rules/final/34-44965.htm