How to Pay a Defaulted Student Loan

Defaulting on a student loan is a really bad idea. The government will come down on you hard to collect payment on the loan. The worst is when they contact your employer about your debt. Administrative wage garnishment is when the government contacts your employer and mandates that they withold a portion of your paycheck and give it to them. It's legal, it's humiliating and it will continue until you do something about the debt. Another practice used is when the IRS keeps each and every and all tax refunds from you until the loan is repaid. The best way to deal with a defaulted student loan is to participate in a loan rehabilitation program.

If you have received a notice from the government that they are planning to garnish your wages in 30 days time contact them at once! Are you in big trouble? Yes, if you do nothing. You will feel very small going up against the government. They've backed you into a corner. Arranging a repayment agreement with you will be totally satisfactory to them. The goal of the department of education and the collection agency is to collect their money! They offer a student loan rehabilitation program. In most cases, if you pay the desired amount on time each month not only will you avoid wage garnishment but after 12 months of paying on time they will update your credit report. The status on the account will read, "Pays as agreed." You must enter into written repayment terms with the creditor and make your first payment before the 30 day notice is expired! Act quickly.

Even if your wages are already being garnished you should call them right away! Ask about the loan rehabilitation program. Also, you have the right to a hearing about your defaulted loan and subsequent wage garnishment. We recommend you contact an attorney or a credit expert. A hearing is a very scary thing to face on your own.

Due to the severity of defaulted student loans resulting in wage garnishment, we recommend you contact a credit counselor. They will be well versed in student loan issues and they'll help you deal with the government. It can be intimidating to try doing that alone. If you think collection agencies treat you like you're just a number wait until you get a taste of working with the IRS or the Department of Education!


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Discover how to fix any student loan in default and get credit.