Can Defaulted Student Loans Lead to Wage Garnishment?

Not all creditors have the right to garnish your wages if you default their agreement, However Federal Loans are an exception. Once you have defaulted on a Federal loan such as a student loan, the government may attempt to garnish your wages after you are notified. The defaulted account will appear as a collection status on your credit report. Creditors do not report their decision to garnish your wages to the credit bureaus.

The account will show up as closed or defaulted, however the balance will still be your obligation. Even though the creditor garnishment does not appear on the credit report, it could possible appear as a public record. Once a public record appears on your report it can have a devastating negative impact on your credit profile and credit score.

A wage garnishment will run until the account is brought up current or the full amount is paid. Any delinquent payments reported on the account will remain on your credit profile and they can hinder your credit score since 35 percent of the score is determined by your payment history.Once a public record appears on your report, you can expect your credit score to drop between six to 150 points. A low credit score can cost you thousands in high interest rates, it can also stop you from getting a new job, buying a new car or even getting the home you been wanting.

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***Individual results may vary. Please call for more details and to discuss your own individual situation.

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