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In this economy, it is becoming more common for people to be unable to af ford their student loan debts. When you have no income and are forced tochoose between making a payment and feeding your family, a loan debt canunderstandably be set aside. However, by not paying your debt, you are leaving yourself vulnerable for astudent loan garnishment and possibly a higher overall debt.
What is a student loan garnishment? Astudent loan garnishment is when your loan payment is taken out of any income you have. This can easily be a paycheck (if you have become re- employed) or an income tax refund.
How does this happen, you wonder? Well, theIRS can legally intercept if you default on yourloans. This is one of the most popular ways the Department of Education collects from defaulted loans. In fact, they claim to receivemillions of dollars annually through this avenue. This is usually the most common way thatgovernment issued loans are repaid if they are defaulted on.
Another way a loan garnishment happens is through your paycheck. How this works is a set amount comes out of each paycheck, via youremployer, and goes straight to the loan lender until your debt is fully paid.While no lender can request more than 15% of your disposable income or 30 times the federal minimum wage limit,this can definitely leave you financially vulnerable.
Student loan garnishments can also come via any federal benefits you may have, including Social Securityretirement benefits and Social Security disability payments. Again, there is a limit to what can be taken of no morethan $750 per month. This student loan garnishment through your retirement and disability income would continue until the debt is paid in full.
The final common way a student loan garnishment takes place is through a lawsuit.Both the federal government and private lenders can take you to court to try to get your loan payments made. This can be even more costly than the initial debt, as court costs and lawyer fees are often tacked onto the full amount. The final judgment amount usually ends up on yourcredit record and will cause you to have to make higher payments than you originally had.
In short, even if your income is limited, it isbeneficial to continue making loan payments. Discuss with your lender your current financial situation and you might be able toget the monthly payment amount temporarily lowered. Now that you are empowered with more information, go out and take action.
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