Will Forbearance Stop Wage Garnishment?

Forbearance Eligibility

A lender grants forbearance to a borrower who is experiencing a temporary economic hardship due to unemployment or serious illness. Lenders postpone payments during military deployment and unusual circumstances, such as natural disasters. A borrower may be eligible for forbearance if payments exceed 20 percent of his monthly income.

Federal loans are eligible for forbearance, including Stafford, PLUS, all federal direct, supplemental and consolidation loans. Private loan servicing companies grant forbearance on some types of loans at their discretion. A borrower must present proof of financial hardship to qualify.

A borrower is not eligible for forbearance if a loan is in default. In some situations a lender may grant forbearance after a borrower has missed a payment or two due to extreme financial hardship while waiting for a decision on a forbearance or deferment application. Lenders instruct borrowers to continue making payments until their application for forbearance has been approved. Defaulting on student loan payments can have serious consequences. A lender may send it to collections, garnish wages or intercept federal and state refunds. A defaulted student loan remains on a borrower's credit history for up to seven years and may prevent him from obtaining credit.

If a borrower is experiencing financial difficulties, he should contact the lender to explore payment postponement options. When a loan is in default, a lender will attempt to collect the past-due payments and may send the file to collections if the borrower does not respond. A lender may resolve to wage garnishment after other collection attempts have failed. A student loan servicing company may garnish up to 15 percent of your disposable monthly income or up to 30 times the amount of the federal minimum wage--$7.25 since July 2009--to repay the outstanding loan balance.

A borrower may have difficulties stopping wage garnishment once it starts. The first step is to contact the lender to negotiate a repayment plan. A borrower may also file a petition to request a hearing and contest wage garnishment in court. The petition must be filed within 15 days after receiving a garnishment notice. Bankruptcy stops wage garnishment for most debts. Generally, student loans cannot be discharged in bankruptcy. If a borrower can prove to the court that repaying the loans will cause a severe hardship for her, the court may discharge them.