If you default on a federal student loan, the government has a right to garnish your wages in order to obtain payment.

The good news is that you can appeal a wage garnishment and request a hearing on the matter in order to demonstrate why it is that you can’t afford the payments and wage garnishment your lender or guaranty agency is seeking.

The U.S. Department of Education Debt Collection Services Office (DCS) holds the hearing after you fill out a “Request for Hearing” form regarding your wage garnishment, and send it to the Department of Education. Find the document online at: http://www.ed.gov/offices/OSFAP/DCS/forms/Request.For.Hearing.pdf

Your hearing can be done in-person, over the telephone, or in writing; the choice is up to you.

IMPORTANT NOTE: When you submit your Request for Hearing, make sure you also send another EXTREMELY IMPORTANT document. It is the “Financial Disclosure Statement,” a 3-page document in which you must document your income and itemize all your expenses. Here is a link to the document online: http://www.ed.gov/offices/OSFAP/DCS/forms/fs.pdf.

This “Financial Disclosure Statement” form will be critical in the hearing/appeal process, and will be closely evaluated, so take the time to carefully list all your bills, and provide copies of those bills as requested.

On page 3 of the Financial Disclosure Statement, you will notice a line that says:
“Based on this Statement, I think I can afford to pay $ per month.” This is where you have an opportunity to essentially offer a counter-proposal to the Department of Education about your student loans. Regardless of what you’ve been asked to pay in the past, here is where you should realistically evaluate your budget and come up with a number that you can undoubtedly pay (without a huge financial strain) month after month.

The Department of Education will make a decision about your case within 60 days after your hearing. But in the meantime, any wage garnishment that has already started will continue to be in force.

This link gives you more info about wage garnishments: http://ombudsman.ed.gov/garnishment.html.

For more information on paying off your student loans, check out my book, Zero Debt for College Grads: From Student Loans to Financial Freedom.