Student Loan Wage Garnishments

There are three general categories of student loans.

1. Direct loans from the U. S. Department of Education;
2. Loans guaranteed by a state loan insurance program, and;
3. Ordinary consumer loans.

Each of these three types of student loans may ultimately be collected by garnishment upon default. However, the legal authority and the procedures applicable in the event a garnishment is pursued depends upon the source and the type of the loan.

Administrative wage garnishments to collect direct student loans from the Federal government are authorized by the  Debt Collection Improvement Act of 1996 and they are subject to the procedures contained within 34 Code of Federal Regulations (CFR) Part 34.

Administrative wage garnishments to collect student loans guaranteed by a state loan insurance program are authorized by the Higher Education Act and corresponding State statutes and regulations. The administrative wage garnishment procedures used by the Kentucky Higher Education Assistance Authority are contained in 11 Kentucky Administrative Regulation (KAR) 3:100.

Wage and non-wage garnishments to collect ordinary consumer student loans are subject the the same statutory law, procedural rules and appellate opinions as are all other judicial garnishments.

It is important to know which type of student loan it is.

Debtor Grounds for a Hearing In an Administrative Wage Garnishment

The federal Debt Collection Improvement Act of 1996 provides administrative wage garnishments for the collection of wide array of debts owed to the federal government. Debtors are entitled to request and obtain a hearing to contest such a wage garnishment. The grounds a debtor may assert are as follows.

(1) Existence, validity, past-due status or amount of the debt: Objection on grounds that –

• The debt was previously paid or settled in full
• The debtor is in compliance with a valid repayment agreement
• The amount owed on the debt is incorrectly stated because not all payments had been credited
• The debtor has a legal defense as to liability for the debt under Federal or State law

(2) Enforceability of the debt through  Administrative Wage Garnishment (AWG):

• The debt was discharged or is currently in active bankruptcy
• The debt is unenforceable by AWG due to involuntarily separation from previous employment and debtor currently employed for less than 12 months

(3) Financial hardship: Garnishment of fifteen  percent (15%) of the debtor’s disposable pay will create a financial hardship on the debtor and his or her dependents .