Student Loan wage garnishment

[cjane1]

Hello all,

     So I am trying to do a payment arrangement for my student loan that is in default. I faxed my info over to Progressive Financial and they are telling me I have to pay 240.00 or will garnish my wages. Then the rep tells me I need to fax over more info by the end of the day because she noticed that our income went down from last year and she can stop the garnishment but must by in today no later. I could not afford not even close to what they are asking at this point. My husbands wages fluctuate  so much that 1 month may be fine but next there is no telling if we could afford it. I know  I can afford the garnishment because it is only 15% of my pay, it is a lot less than what they are requesting . Will  the wage garnishment  take me out of default after nine months even though it is a forced payment?

[SCF]

No, wage garnishment is not the same thing as rehab.  You have to make the rehab payments voluntarily under a rehab plan that is set up with the collection agency that is holding your loan.  Push the collection agency for a "reasonable and affordable" payment plan - tell them you want to provide them with proof of your income and expenses and then suggest a payment amount that will work for you.  They are required to reach a payment plan that you can afford and set you up on rehab.

[Anonymous]

There are some new rules for Rehabilitation since earlier this year. The collection agencies are supposed to offer you a Rehab payment based on the IBR scale - 15% of your discretionary income. Garnishment is based on 15% of your gross income, and is not a good way to pay your student loans. 

Instead of dealing with a threatening collection agency, you may want to use Direct Consolidation to get the loans out of default, and then apply for an income-related payment plan such as IBR. It sounds like the collection agency isn't being upfront with you, which is pretty much the norm. 

Here's more about the new Rehab rules that no longer allows collection agencies to set the payment amounts: http://www.forbes.com/sites/reynagobel/2014/06/19/default-rehab-the-biggest-change-to-student-loans-...

You can use either Direct Consolidation or Rehabilitation to get out of Default, but in my experience and other posters', the Rehab process can be a real PITA due to the collection agency involvement. 

[scvbd99]

Consolidating to get out of default is an option, but it also makes it so you can't rehab the loan(s).

The benefits of rehabbing made it worth it for me to consolidate after new lenders picked up my previously defaulted loans.  But there are a lot of factors individuals have to weigh when making that choice.