- 6 Ways to Ensure You’ll Have Enough Money in Retirement
- How Do Mistakes Get Removed From Your Credit Reports?
- Your Early Holiday Present: Gas at $3 a Gallon or Less
- Nearly Half of US Workers Don’t Have a Work-Based Retirement Plan
- Lotteries Are Losing Their Allure With Some Customers
- Pop Quiz: Can You Profit When Stocks Fall?
- Cold Is Coming: 10 Ways to Winterproof Right Now
- Government Sues AT&T for Allegedly ‘Throttling’ Unlimited Data Customers
More student loan borrowers are learning the hard way that you can run but you can’t hide from student loan debt.
According to The Wall Street Journal, the U.S. Department of Education is aggressively pursuing payment from borrowers who are in default – those who have missed 12 monthly payments.
The Education Department, the nation’s largest student lender, is docking paychecks (taking up to 15 percent of after-tax wages) from borrowers in default to help pay down their debt. Unlike private lenders, the government doesn’t need court approval to garnish workers’ wages.
More than 174,800 borrowers, including college dropouts, teachers, doctors and other professionals, saw their paychecks take a dip in 2013 as their wages were garnished by the Education Department. That’s a 45 percent increase from a decade ago. It also represents just 8 percent of the 2.2 million federal student loan borrowers who were in default as of September 2013. The WSJ said:
The department said it is working to help students get a college education while also making sure taxpayer money that is funding student loans is repaid. “Wage garnishment is a tool of last resort used by the department to recover defaulted loans,” said department spokeswoman Dorie Nolt.
This is taking a massive toll on borrowers, as many experience several years of docked wages. Says the WSJ:
About 72 percent of such borrowers in fiscal 2011 still were getting money taken out the following year, according to the Education Department. Many remain in garnishment for at least five to 10 years, said Mark Kantrowitz, senior vice president at Edvisors.com, a Las Vegas-based financial aid website that tracks student loan debt.
The government has a couple other tricks up its sleeve to collect defaulted student loans. According to AARP, Uncle Sam can do more than garnish your wages. He can report you to credit agencies and tap your tax refunds and Social Security payments until the debt is paid in full.
Of course, borrowers do have repayment options intended to help keep them from defaulting. The Education Department has deferment and forbearance options if borrowers can prove financial hardship. I was able to obtain an economic hardship deferment on my student loans after I graduated from college. I was a television reporter making just $7 an hour, which barely covered food, rent and gas for my car. The deferment option was a huge help to me.
President Obama recently extended eligibility for a cap on student loan payments, which is expected to ease the loan burden for millions of borrowers.
Remember, your student loans are not going to go away. Even if you declare bankruptcy, your loans will likely still remain, waiting to be paid. Check out a recent article on the worst ways to get rid of your student loans here. If you’re wondering if your student loans can be forgiven, click here for information from Money Talks News finance expert Stacy Johnson.
How do you think the federal government should address defaulted student loans? Share your thoughts below or on our Facebook page.