Consequences of Student Loan Default
Default can have several immediate negative consequences and a long-lasting negative effect on your financial future.
You could have up to 15 percent of your disposable income garnished, or withheld, from your paycheck each pay period to make payments on your student loan debt. If you have multiple loans held by multiple guarantors or the US Department of Education (ED), you could have up to 25 percent of your disposable income garnished. In the state of Texas, your employer may charge an administrative processing fee of up to $10 per Administrative Wage Garnishment transaction. Disposable income is the amount of your total (gross) salary minus any deductions required by law, such as state and federal income tax, child support, and mandatory retirement deductions.
By law, you have certain rights when you’re facing Administrative Wage Garnishment:
- You can inspect and copy records relating to your debt.
- You can establish a repayment plan if an Order of Withholding from Earnings has not been issued.
- You can request a hearing.
- An employer may not fire you, refuse to employ you, or discipline you because your wages are garnished.
At least 30 days before the initiation of garnishment proceedings, Trellis will mail to your last known address a written notice that describes your student loan debt, states Trellis’ intention to collect the debt through deductions from your wages, and provides an explanation of your rights. If you don’t send your payment within the time period stated on this Notice Prior to Wage Withholding, then your wages may be withheld. Generally, once wage garnishment has been initiated, the wage withholding order will remain in place until your employment is terminated or your loans are paid in full.
Payments withheld under Administrative Wage Garnishment don’t appear as voluntary payments on your credit report, though they are deducted from your loan balance. In addition, if you’re subject to Administrative Wage Garnishment, you may not reinstate your federal student aid eligibility.
If you have been notified that Trellis is planning to garnish your wages and you want to find out more about your rights or how to avoid having your wages withheld, call (512) 908-4125, or send email to firstname.lastname@example.org.
Money you’re eligible to receive from the federal government, such as an income tax refund, can be diverted to repay your defaulted student loans. This is known as a Treasury offset and is required by federal law and regulations.
If you’ve defaulted on your student loans, your loan may be certified for participation in the Treasury offset program. If you establish a repayment agreement satisfactory to Trellis and continue to make timely payments, your loan will not be subject to Treasury offset. However, if you become delinquent in your repayment agreement, you may once again be subject to Treasury offset.
By federal law and regulations, you have certain rights when you are facing Treasury offset:
- You must be notified that Trellis is proposing to use Treasury offset to collect money from you. A notice will be sent to the address you used when filing your most recent federal income tax return that explains your rights with regard to the Treasury offset process.
- You must be given an opportunity to:
- Avoid offset by arranging to repay your loan
- Review any records about your loan
- Show why the loan is not in default, is not delinquent, or why you aren’t legally responsible for repaying it
- If your spouse’s tax refund was subject to Treasury offset because of your federal debt, your spouse may be entitled to claim his or her refund. You can contact the IRS about your Treasury offset at (800) 304-3107.
If tax refunds or other federal payments are withheld, they won’t appear as voluntary payments on your credit report, although they will be deducted from your balance. Treasury offsets don’t count toward any program that requires voluntary payments, such as reinstatement or rehabilitation.
Borrowers who receive a letter from Trellis warning of possible Treasury offset should call Trellis Borrower Services at (800) 222-6297 or send email to email@example.com.
The total balance due on your account changes daily as simple interest accrues. Collection costs are calculated as a percentage of the total principal and accrued interest balance. The total amount due on any given day includes all principal, accrued interest, and the applicable percentage rate of collection costs.
If you set up a repayment arrangement and make your first payment within the first 60 days of the default claim payment date, collection costs won’t be added to your account as long as your account remains current. If your account ever becomes 60 days past due on the new arrangement, collection costs will be assessed at that time and will remain on your account until it’s paid in full.
For more information on collection costs, call Trellis Borrower Services at (800) 222-6297 or send email to firstname.lastname@example.org.
Trellis reports credit information to four nationwide consumer reporting agencies:
If you’re interested in more information regarding voluntary repayment, call Trellis Borrower Services at (800) 222-6297 or send email to email@example.com.
If the information on your credit report appears inaccurate or you disagree with the accuracy or completeness of the information being reported to the nationwide consumer reporting agencies, contact Trellis. Trellis representatives will answer your questions or send you information to assist you in addressing your concerns about your credit report.
You can also complete and return a copy of the Trellis Credit Bureau Dispute Form. Please note that this form is for Trellis defaulted student loans only. If you’re disputing any non-Trellis accounts or other items on your credit report, you must contact either the national consumer reporting agency or the financial institution that’s reporting the information to resolve your dispute.
For more information on credit reporting, call Trellis Borrower Services at (800) 222-6297 or send email to firstname.lastname@example.org.
Once your federal student aid eligibility has been reinstated, you must remain current on your loan payments throughout the repayment period. If you fail to remain current in making your monthly payments, you’ll become ineligible for additional federal student aid until your defaulted loan is paid in full.
For more information on how to set up repayment arrangements or to request reinstatement of your federal student aid eligibility, call Trellis Borrower Services at (800) 222-6297 or send email to email@example.com.
Once you establish a satisfactory repayment arrangement with Trellis and are current in your payments, Trellis will issue a warrant release to the Texas State Comptroller.
For more information on repayment or to request a warrant release letter, call Trellis Borrower Services at (800) 222-6297 or send email to firstname.lastname@example.org.
To request more information on the release of academic records or to set up repayment arrangements, call Trellis Borrower Services at (800) 222-6297 or send email to email@example.com.