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Private Student Loans and Wage Garnishment

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In a Nutshell

Defaulting on the payment of your private student loans can negatively affect your credit score and result in other undesirable consequences. One is wage garnishment. A private student loan lender can even levy or take money from your bank account. Thankfully, there are solutions that can help you avoid these challenges and even provide debt relief.

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated June 5, 2021

This article will provide information on wage garnishment of private student loans. These types of loans are provided by private lenders rather than the federal government. Repaying any type of student loan can be difficult, especially when income is limited. It’s easy to get behind on student loan payments during tough times. 

Defaulting on the payment of your private student loans can negatively affect your credit score and result in other undesirable consequences. One is wage garnishment. A private student loan lender can even levy or take money from your bank account. Thankfully, there are solutions that can help you avoid these challenges and even provide debt relief. 

Defaulting On Any Student Loans Can Lead To Garnishment

Many Americans have defaulted on student loans. Even with favorable terms like good interest rates, loan repayment can be difficult for many student loan borrowers. Private student loan lenders may sue you if you default on paying your student loans. This can cause your wages to be garnished. Fortunately, you have options so you can avoid the pitfalls of wage garnishment. 

Defaulting on student loans means not paying the loan according to the terms of the loan for a significant amount of time. A student loan in default is different from a delinquent student loan. A student loan is considered delinquent as soon as a monthly payment is past due. If you continue missing payments, then the student loan will go into default and will no longer be in good standing. 

The number of days of non-payment necessary for a lender to consider it in default depends on the type and terms of your loan. Many federal student loans are considered to be in default after 270 days of a borrower missing a payment. Private student loan lenders seem to be less patient. Some will consider a loan in default after only 90 days of a borrower missing a payment. 

Most Creditors Need A Judgment Before They Can Garnish Your Wages

Before getting an order for wage garnishment, almost any lender (other than the federal government) must obtain a judgment. This requires that a private lender files a lawsuit. A student loan borrower must receive notice of this lawsuit. If the lender wins the lawsuit, it will receive a judgment. If you don’t respond to the lawsuit, the lender will win by default and receive an aptly-named default judgment.

With a court order, debt collectors can move forward and effectively collect their debts. Even a collection agency can start garnishing your wages or bank account.

How long must these private lenders wait before suing you for defaulting on your loans? As soon as the terms of the loan allow them to sue, which is usually upon default. Private lenders will use the same methods of collecting that credit card companies and healthcare providers use to collect their debts. This means that you may be subject to different levels and forms of harassment depending on the debt collector. 

How long will they wait before suing you for defaulting on your student loan debt? If you fail to work out a solution with your lender or servicer after defaulting, a lawsuit may soon follow. Over twenty states give private lenders six years to sue borrowers who have defaulted on their loans.

Federal student loans, which are loans provided by the federal government, are treated differently since the government doesn’t have to file a lawsuit against you to garnish wages. The U.S. Department of Education can take up to 15% of your disposable pay without getting a court order. The federal government can garnish wages for loans that include Federal Stafford Loans, Federal Parent PLUS Loans, Federal Grad PLUS Loans, and Federal Consolidation Loans.

But, there is no valid reason to give up if student loans are causing you financial problems. Many borrowers have been in this situation and found effective debt relief in one form or another. There are ways to stop wage garnishment in 2021.

Other Consequences Of Defaulting On Private Student Loans

There are other unfavorable consequences caused by defaulting on student loans. For example, defaulting can negatively affect your credit score. Lenders look at different aspects of what goes into a credit score to decide whether you’re worthy of credit offers with favorable terms. A poor credit score can make it hard to get loans in the future for important things like a home or car. It even has the potential to affect whether you receive a professional license.

There's no federal law requiring the discharge of private student loans upon the death of the borrower. This means that lenders of these loans could collect against your estate, from a cosigner, or possibly from your spouse. In community property states, any assets and liabilities accumulated during the marriage are shared with your spouse. 

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Bankruptcy Provides Limited Debt Relief For Private Student Loan Wage Garnishment

Bankruptcy is one option for solving certain kinds of debt problems. This form of debt relief may be limited for student loan borrowers though since it’s difficult (but not impossible) to discharge private student loans in bankruptcy. These student loans are loans extended by private lenders that are not backed by the federal government. You must show an undue hardship to discharge student loans. This may be a financial hardship.

Unlike federal loans, private loans don't have many provisions for relief when you miss any payments. Unlike federal borrowers, private borrowers usually can’t take advantage of income-based repayment plans, forbearances, and deferments. 

For some borrowers, payments for student loan debt can be successfully managed through a Chapter 13 bankruptcy case. This type of bankruptcy allows you to reorganize your debts in a three- to a five-year repayment plan. You will need to file a Chapter 13 case if you make too much money to qualify to file a Chapter 7 case. Filing a Chapter 13 can help you deal with your debts and reach goals that you would not be able to accomplish through a Chapter 7 case.

Bankruptcy prevents all debt collection activities while the bankruptcy case remains active. As soon as you file your bankruptcy case, the automatic stay goes into effect. Not only does it stop constant telephone calls, aggressive letters, and any lawsuits for unpaid debts, the automatic stay halts any current and ongoing wage garnishments. While bankruptcy can’t clear a judgment for an unpaid private student loan, it can clear judgments for debts like credit cards and medical bills. 

If a Chapter 13 case isn’t the best option for your situation generally, filing a Chapter 7 bankruptcy case can help eliminate other debts, which might free up money you can use to pay your student loans. Chapter 7 bankruptcy is a powerful tool that allows you to once and for all erase many types of debts, including credit card debt, medical debt, car loans, and payday loans.

Other Options For Managing Your Student Loan Debt

Even if filing bankruptcy won’t provide any relief from student loan debt, you still have repayment options available that may help with the rehabilitation of your private student loans. Some states and employers offer student loan repayment assistance to help you pay off private student loan debt.

You can look into eligibility for loan forgiveness programs, income-driven repayment plans, deferment, forbearance, refinancing, and loan consolidation. Many private loan refinance companies offer deferment or forbearance. These options will help you temporarily postpone your payments. You’ll have some breathing room and it will help you avoid delinquency and default.

Debt settlement where you attempt to settle your debts once and for all is always an option, if you have the means to pursue it. You might be able to negotiate with your lender and settle the debt for less than the total amount owed if you can offer a large lump sum upfront. You might be able to refinance the loans by finding a different lender that offers a better interest rate and other loan terms. Consolidation of all your debts into one loan and one monthly payment is yet another option. You have more than a few options. Learn about them and use the one that’s best for you.

You may also negotiate with your lender to establish new payment arrangements. Although private student loans aren’t currently eligible for coronavirus relief under federal law, many private servicers are offering their own debt relief options. Contacting your loan servicer can help you figure out what options are available if you can’t make your student loan payments.

Most federal student loan payments are suspended, and interest is waived, through September 30, 2021, due to the COVID-19 national emergency. Collection actions, including student loan wage garnishments, and Treasury offsets, like tax refund offsets and Social Security intercepts, for defaulted loans are also paused during this time.

Let’s Summarize...

Most student loans have the potential to cause financial problems. Student loan default can have serious effects on your personal finances. It can lead to wage garnishment and hurt your credit score. Thankfully, there are options for student loan debt relief. 

Bankruptcy provides limited debt relief and offers protections afforded by the automatic stay. Despite student loans being difficult to discharge in bankruptcy, you can discharge other types of debt, like credit cards and medical bills. This will free income so you can pay your student loans and avoid garnishment. Filing a Chapter 13 bankruptcy will also allow you to reorganize your student loan debts to make paying them more manageable. 

Upsolve’s free web tool can help you file for bankruptcy if you are filing a simple Chapter 7 case. Upsolve can also refer you to a bankruptcy attorney in your local community for a free consultation.

Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer


Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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