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If your federal student loans are in default there’s good news: You’ll get a temporary reprieve on wage garnishment and you’ll also get a stimulus check from Uncle Sam.

Under the CARES Act, the government won’t withhold the money you owe for defaulted federal student loans out of your payment. It blocks the IRS from garnishing your tax refund for those late loan payments. Also, the government won’t ding your wages or withhold social security payments for six months under the relief package. 

That will provide breathing room for Americans, who owe more than $1.6 trillion in student loan debt, spread out among about 45 million borrowers. The Department of Education has leaned on wage garnishment to recoup outstanding debt from delinquent borrowers. From July 2015 to September 2018, debt collectors nabbed $2.3 billion in wage garnishments, according to Student Loan Hero.

Experts advise taking advantage of the reprieve to plan how you’re going to resume payments come October.

“Instead of just enjoying the break from your loans, think of a game plan to ensure you come out of this better for it rather than being stuck in the same situation,” says Andrew Pentis, a certified student loan counselor with Student Loan Hero. “Keep up with the news so you know what relief programs you may be eligible for.”

Here’s what you need to know:

Will my wages or stimulus check be garnished?

The government won’t take money you owe for defaulted federal student loans out of a stimulus check.

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What if my tax refund was already garnished?

If your tax refund was withheld because you defaulted on a federal student loan on or after March 13, which was the day President Donald Trump declared a national emergency, it will be returned to you, according to the Department of Education. That also applies to garnished wages and withheld Social Security benefits.

How does wage garnishment temporarily stop?

The Department of Education said it is relying on employers to make the change to borrowers’ paychecks and will monitor employers’ compliance with the request to stop wage garnishment. If your wages continued to be garnished after March 13, contact your employers’ human resources department.

What about loans in collections?

The Department of Education will halt collections for at least 60 days, going back to March 13. It will refund $1.8 billion to 830,000 student loan borrowers from funds that were collected beginning in mid-March. It doesn’t apply to defaulted federal student loans held by guaranty agencies and colleges. 

Does this apply to private loans?

No. Private debt collectors could still garnish student loan debts.

If you have trouble paying, contact your lender for options. Depending on your private student loan lender, you could pause payments due to financial hardship from the coronavirus pandemic.

Call your lender or loan servicer and explain your situation. Your lender may redirect you to a collections agent. 

“It’s best to contact your loans servicer initially because scams have run rampant, particularly targeted toward student loan borrowers who are in default and are looking for any solution,” Pentis says.


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