Student loan wage garnishment works like this: default your federal student loans and therefore the government can take up to fifteen of your paychecks. for somebody who normally takes home $2,000 monthly , that amounts to $300 garnished.
As a part of the primary coronavirus relief bill, the govt paused wage garnishment and other collection activities for many federal student loans as of March 13, 2020. Those protections are extended through Sept. 30, 2021.
The Department of Education has said it’ll return any money seized between March 13, 2020 and therefore the end of the relief period. But if your wages are still being garnished, ask your human resources department about your situation.
If your were facing student loan garnishment before relief went into effect — otherwise you might when it ends — don’t panic; you’ve got options that are far less painful than a 15% hit to your paycheck. the perfect time to require action is once you begin missing student loan payments. At that time , your loan servicer can assist you explore other repayment options, including income-based plans that cap your monthly payment, and deferment or forbearance, which pause repayment altogether.
Once your loans are in default — nearly nine months overdue for many federal loans — those options are off the table until your loan is in good standing. you’ll rehabilitate your loans to maneuver out of default (more thereon below). you furthermore may have a quick window to consolidate your federal loans (combining them into one loan with its own interest rate) before the Department of Education , via a personal collection agency, moves to garnish your wages.
Better Payment terms
Depending on the interest rates of your current loans, a consolidated loan may decrease your monthly payments or prolong repayment period. It also may happen due to your enhanced credit history. When you took your current loans, you were a student with a low potential of repayment. However, if you want to consolidate, you should be a graduate. And if you have found a new job, or you enhanced your credit history in any way, your new loan may offer you a lower interest rate. Lastly, you can substitute your variable-rate loans to a fixed-rate one which ensures the same pay no matter of economic conditions.
Unfortunately, student loan consolidation does not always improve your financial difficulties. It can even worsen if you do not consider all features. All the benefits mentioned above might turn against you depending on your current loans, interest rates, and repayment periods.
Loss of benefits
Consolidation may erase the benefits that come with other loans. For instance, if you consolidate federal loans during the grace period, you should start payments immediately. Hence, your six month grace period might be lost. Moreover, you might lose cancellation benefits or rebates of your current loans. If you consolidate, as a federal loaner, you might lose forgiveness benefits. This benefit happens due to the wrong management of the educational department.
Worse Payment terms
If you do not calculate your current debts and future terms of the consolidated loan, you might end up with higher payments than before. Besides, the repayment period might be prolonged, which is sometimes not preferred as the future is always uncertain. Most of us are not sure how our financial conditions will be in a few years. Moreover, sometimes, consolidation can be a variable-rate loan that will increase over time.
As you understand, student loan consolidation has both advantages and disadvantages. You can get better conditions of student loan consolidation, only if you make your calculations beforehand and decide whether it is suitable for you or not. With its eligibility requirements, different types and terms, the process might seem confusing. Besides, if you do not have time or enough financial illiteracy to deal with consolidation, Student Loan Resolved is ready to help you anytime you wish. We have a professional team of advisors. Besides, we offer you many other solutions, such as student loan forgiveness. All you need to do is contacting us to learn more about our services, ask your questions, and utilize our services.