The government can garnish your wages without first getting a judgment in court. A total of 15% of disposable pay may be garnished. No matter what, you can keep an amount equal to 30 times the minimum wage. The minimum wage is now $6.55/hour. This means that 30 x 6.55 = $196.50 is protected per week. The minimum wage will rise again in July 2009.

Collection letters will often highlight this power (see sample)

Example: Joe has weekly disposable pay of $250. Based on the minimum wage calculation, he definitely gets to keep $196.50. The government can then take the lesser of the amount his income exceeds $196.50 ($250 - $196.50 = $53.5) or 15% of his income (15% of $250= $37.50). Since $37.50 is less than $53.50, this is the amount the government can take each week from Joe’s wages.

“Disposable pay” is the pay remaining after deduction of any amounts required by law to be withheld. The maximum for student loan and all other garnishments is 25% of disposable income.

Challenging Administrative Wage Garnishment

The Department of Education or a guaranty agency must notify you before the garnishment. You must be given the opportunity for a hearing to challenge the existence or amount of the debt and the terms of the repayment schedule. The garnishment cannot go forward if you request a hearing within 15 days of the receipt of the notice. If you request a hearing after that date, the garnishment will usually begin, but you can still stop it later if you win your hearing.

The first and most common defense is that the garnishment would cause financial hardship to you and your dependents. You will have to fill out this form or something similar in order to show hardship.

Other important challenges include:

• You have repaid the loan,
• It is not your loan or there is some other reason why you do not owe the money,
• You have already entered into a repayment agreement and are making payments,
• You have filed for bankruptcy and the case is still open or the loan was discharged in bankruptcy,
• The school failed to pay you an owed refund,
• The borrower is dead or totally and permanently disabled,
  
• The loan is not enforceable, for example because of forgery, or
• You are eligible for a closed school or false certification discharge.