Last week, Senator Lamar Alexander, the Chair of the U.S. Senate Committee on Health, Education, Labor and Pensions, proposed a program that would require student loan borrowers to repay their loans through mandatory automatic deductions from their paychecks. Yesterday, the National Consumer Law Center released a policy brief, The Dark Side of Payroll Withholding to Repay Student Loans, explaining why forcing borrowers to pay their student loans through their employers will harm many of the very borrowers these programs are hoping to help.
For many borrowers, including those who lack stable employment or work in the gig economy, forced automatic payroll withholding may mean diverting money away from rent, heat or food in order to pay their student loans. It could also mean that they would have to give their employers a lot of information about their families (potentially including a spouse’s income) and their student loan debt in order to calculate the student loan payment amount.
Some borrowers already experience a form of mandatory payroll withholding to repay their student loans, administrative wage garnishment, which can happen if a borrower falls behind on loan payments and defaults. Many borrowers have told us that wage garnishment makes it harder to pay the rent or other bills, or buy school supplies for their kids.
Have you experienced wage garnishment? How has it impacted you and your family? Share your story.
Also, did you know that you may be able to challenge or reduce a federal student loan garnishment? The most common reason is that the garnishment would cause financial hardship to you and your dependents. Click here to see more on how wage garnishments are calculated and the defenses you can raise.