Frequently Asked Questions about AWG

FOR BORROWERS:

• What authority does the Department of Education/loan holder have to garnish wages?

Congress has authorized guaranty agencies and the Department of Education to collect on defaulted loans by garnishing wages.

• Can someone walk me through this process?

The AWG process is described in the Procedural Flow Chart. Questions specific to your situation should be addressed to your loan holder.

• Does my employer have the right to garnish my wages if I am unable to pay my student loan?

Yes. If you feel the AWG will cause you a hardship, you should request a hearing and submit documentation to support your position.

• Will this have an effect on my credit rating?

Defaulted loans are reported to credit bureaus 60 days after the date of default, regardless of wage garnishment.

• Can I reduce the amount of garnishment?

Yes, but only if extenuating circumstances exist and can be documented, such as financial hardship.

• Does this affect any other government services/payments I might be receiving?

Some loan holders will pursue loan payments through the Treasury Offset Program (TOP) that redirects any federal payment to the borrower (e.g. tax refunds) to defaulted student loans. It is possible to have both your wages garnished and your tax refund withheld.

• How do I appeal this garnishment?

You may request a hearing up to twenty days after the initial notification is mailed. You may request a hearing after the twenty-day limit but AWG will start and continue until a hearing determination is made.

• Can I work out a voluntary repayment plan and avoid this action?

The best way to avoid this action is to establish a reasonable payment plan with your loan holder before your loans default. AWG will begin thirty days from the time you receive notification. To avoid AWG, you should establish a voluntary repayment plan within that time period. AWG, once started, will continue until your loans are removed from default, or you receive a hardship determination from a hearing.

• Will this affect my employment?

No. Your employer does not have the right to terminate you because of the wage garnishment order.

FOR EMPLOYERS:


• If the employee disputes this wage withholding order, what should I do?

The employee has been given an opportunity to dispute the order by requesting a hearing. As an employer, you are required to continue garnishing wages until a hearing determination has been made.

• The employee has a garnishment in effect already, what should I do?

You must still carry out the garnishment, but the amount you must withhold may be reduced. The law (15 USC § 1673) imposes a maximum on how much can be garnished at any one time; currently, that maximum is 25% of the employee’s disposable pay. So if that current garnishment is taking, for example, 20%, the AWG Order (assuming it is next in line) is still operable to the extent of the remaining 5% of the employee’s disposable pay. On the other hand, if the prior garnishment(s) account for 25%, then nothing would have to be withheld on the AWG Order, at least until the prior garnishment(s) were satisfied or expired. Notification of this status should be sent to the loan holder.

• If I don’t comply with the order, what will happen to me?

Non-compliance could result in penalties or legal action on the part of the garnishing authority.

• If the employee takes a leave of absence for 10 weeks, what do we do?

Notify the garnishing authority of the leave and hold the order pending the return of the employee.

• My employee gets paid hourly and their pay fluctuates each week. Can I set up the deduction to be the same each week?

Yes, but only if the employee agrees to an amount and signs a voluntary stipulation agreement. This agreement is available through the loan holder.

• Our company pays its employees on a weekly basis. Do I have to submit to you on a weekly basis?

No, you can deduct the garnished amount on a weekly basis and remit payment to the loan holder on a monthly basis.

• If the employee’s pay varies, how should I complete the amount on the Employer Acknowledgement form?

In this case, you should base the amount to be withheld on the most recent pay period.

• What is disposable pay?

Disposable pay is determined by calculating the total compensation paid or payable for the employee’s services (e.g. wages, salary, commissions, bonus, severance pay, etc.); and subtracting from that amount the sum of all amounts required by law to be withheld from that compensation, such as state (if any) and Federal income tax, and Federal FICA or OASI tax (social security). You should not subtract amount withheld for savings bonds, employee contributions to retirement plans or health insurance and the like. Also, be sure that you do not subtract garnishments.

• The AWG Order is not signed do I have to honor it?

Yes. The law (20 USC § 1095a) does not require that the Order must be signed to be valid and legally binding. If you have any question about authenticity, please contact the loan holder.

• I am told that my state law forbids wage garnishment, so can’t I just ignore the AWG Order?

No. AWG is authorized by a Federal law (20 USC § 1095a), which takes priority over State law.

• Can I impose a fee for administering this? If I can, who pays?

That depends on the state; some states permit the imposition of a fee or charge on the employee. Federal law does not address the issue. You should check your state’s law.

• The Order directs that I send the payments to someone other than the loan holder. Is that ok?

Yes. Loan holders are permitted to retain others to aid in the administration of the AWG process.