You get your paycheck one week and there is a big bite out of it. Out of nowhere, there is an attachment on your wages! But no one has sued you, so how can they do that? Well, do you have a federal student loan? Are you in default? If so, that is probably the reason.
The federal government can garnish your wages immediately and without the institution of a lawsuit, which is required for most any other creditor in New Jersey. Even if you live in a state like Pennsylvania that prohibits wage executions except in very specific circumstances, you are not safe.
Under both the Higher Education Act and the Debt Collection Improvement Act, the government can go through administrative wage garnishment.
How Much Can They Take?
Under the Debt Collection Improvement Act (DCIA), the U.S. Department of Education can take the lesser of:
- 15% of your disposable income; or
- The amount exceeding 30 times the state minimum wage (in NJ, that's $7.25/hour or anything over $217.50/week)
Think you're safe because you already have a wage garnishment, and New Jersey law only allows one at a time? Think again! Federal law limits total garnishments to 25% of disposable earnings, so if you’ve got another creditor garnishing your wages then the student loan garnishment is limited to the difference. Wow!
So What Are My Disposable Earnings?
“Disposable pay” is defined in the DCIA as wages left over after deducting amounts required by law to be withheld. This includes Social Security taxes and withholding taxes, but not any amounts withheld under a court order such as child support or restitution. It also does not include deductions for retirement plans or health insurance!
What Can I Do?
If you live in southern New Jersey, are in default on your federal student loans, and are facing a wage execution, I may be able to help! Please feel free to call my office at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your case.
If you would like more information about student loans, you can dowload my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.