If you’re experiencing wage garnishment – the involuntary withholding of money from your paycheck to cover your unpaid debts – then you need to understand what exactly student loan wage garnishment is and why it is happening to you.

What Is Wage Garnishment?

Administrative Wage Garnishment, or AWG, is the term for the federal government’s ability to withhold your earnings if you miss payments toward your student loan debts, FederalStudentAid reported.

AWG applies only to your non-tax debts owed to the federal government. Other entities besides the federal government can also seek to garnish your wages for repayment of debt, but Administrative Wage Garnishment refers specifically to the tool the government is entitled to use to recover missed payments. Under AWG, the federal government is allowed to withhold up to 15 percent of your “disposable pay” until your debt is paid in full. In this case, “disposable pay” means the entire amount of your paycheck that remains after legally required deductions such as income tax withholdings and contributions to Medicare and unemployment.

When Does Wage Garnishment Occur?

Wage garnishment occurs when you miss so many student loan payments that your loan is considered to be in default. Typically, defaulted loans are loans for which no payments have been made in 270 days or more.

Once you miss nine months of payments and are in default of your student loans, you could face serious consequences. Even if you previously had years left to finish paying your debt, your entire loan is now considered due, and a collections agency can begin hounding you seeking payment. You begin to incur additional costs such as late fees and collections fees, raising the amount of money you owe immediately even higher. Your credit score will take a hit that could take years to recover from, making it difficult for you to secure financing from any lender for any purpose.

When the federal government decides to begin garnishing your wages, the U.S. Department of Education sends an official letter to your employer requiring them to withhold money from your paycheck to repay what you owe.

The Negative Effects of Wage Garnishment

The most obvious negative effect of having your wages garnished is missing out on the money you have worked for. If you were already struggling to pay your student loans, there’s a good chance that losing another 15 percent of your paycheck will only make matters worse. As unfair as it may seem to have the money you worked for seized from you, it is perfectly legal for the government to take wage garnishment action when your loan is in default.

Unfortunately, you now owe so much due to the additional fees and interest charges that garnishment could continue for a very long time. What might last even longer than your wage garnishment is the harm defaulting on your student loans has done to your credit score. It’s possible that once this wage garnishment appears on your public record, your credit score could plummet by as much as 150 points.

Wage garnishment can also lead to tension between you and your employer. You may feel embarrassed that your employer is now involved in your financial troubles and knows that you’re struggling to pay your debts. Your employer is legally obligated to carry out this garnishment order for as long as you work for the company, until you take action to put an end to the wage garnishment. Some employers may even choose to terminate an employee whose wages are being garnished, to avoid liability for your debts or simply because failing to pay your loans reflects badly on you. This is perfectly legal for an employer to do, as long as you are an at-will employee.

How to Deal With Wage Garnishment

First of all, take a deep breath and try to remain calm. Of course it’s upsetting to find out that your wages are being garnished. You might be angry at the government, your employer, the tough economy that made it so difficult to repay your debts and even yourself.

As frustrating as wage garnishment is, getting worked up about it won’t help you solve the problem. What you need to do is consider your options moving forward and find out how you can stop wage garnishment and turn your financial situation around sooner rather than later.

Options for Getting Out of Default

The good news is that just because your wages are being garnished due to missed student loan payments doesn’t mean you are completely out of luck. You do have three options for getting out of student loan default, FederalStudentAid reported. The bad news, however, is that there’s no quick and easy way to end wage garnishment.

To get out of loan default and end wage garnishment, you can:

Repay your loan in full
Complete a loan rehabilitation program
Consolidate your defaulted student loan into a Direct Consolidation Loan

Repaying your loan is the simplest way to get out of wage garnishment. Of course, that’s easier said than done. Paying your full amount of debt, with interest and fees added, could take years.

Undergoing a loan rehabilitation program can help you escape wage garnishment, but it will take nine to 10 months to complete. You have to make nine payments over the course of 10 consecutive months, not including the money that is being withheld from you due to wage garnishment. Your monthly payment will typically be 15 percent of your discretionary income, but it may be as little as $5.

Consolidation is another option to get out of wage garnishment – and in many cases, it may be the best option, according to The Huffington Post. You can consolidate your loans if you either commit to a new income-based repayment plan or make three consecutive on-time monthly payments on your defaulted loan prior to applying for consolidation. Consolidation allows you to get out of wage garnishment faster.

How to Avoid Wage Garnishment

Wage garnishment doesn’t happen unless you default on your federal student loans. Garnishment is essentially the government’s last resort in seeking repayment for the loans is has backed with taxpayer money.

You can stop wage garnishment from happening in the first place if you ask for help repaying your student loans before those loans go into default, FederalStudentAid reported. Options for students struggling with college debt include:

Changing to a different repayment plan
Choosing an income-based repayment plan
Requesting deferment or forbearance of your student loan payments

By communicating with your loan servicer when you first begin to have trouble making payments, you can prevent your loans from going into default – and stop the serious consequences, like wage garnishment, that can go along with loan default.