WAGE WITHHOLDING FOR DEFAULTED STUDENT LOANS A HANDBOOK ...
WAGE WITHHOLDING FOR DEFAULTED
STUDENT LOANS
A HANDBOOK FOR EMPLOYERS
Revised June 18, 2008
TABLE of CONTENTS
A Letter to Employers..3
The Student Loan Program.4-5
The Basic Steps Employers Follow for Withholding ........................................................ 6
Employer Notification ...................................................................................................... 6
Amount of Withholding .................................................................................................... 7
How to Remit the Earnings Withheld.7-8
When to Stop Withholding ............................................................................................... 9
Employer Compliance ..................................................................................................... 9
Inquiries......................................................................................................................... 10
Public Law 102-164; 20-U.S.C. ?1095-a-et seq. ..................................................... 10-11
Privacy Act Notice ......................................................................................................... 12
Employer Instructions for Complying with the Order of Withholding ......................... 13-15
Attachments & Instructions
Attachment A1 Order of Withholding from Earnings ................................................ 17
Attachment A2 Second Notice of Order of Withholding from Earnings.................. 18
Attachment B1 Employer Acknowledgment of Wage Withholding ......................... 19
Attachment B2 AWG Worksheet
Instructions................................20
Attachment B3 AWG Withholding
Worksheet..................................21
Attachment C
Release of Order of Withholding from Earnings.22
Attachment D
Employer Acknowledgment of Release of Order of Withholding .23
Attachment E
Employer Notice of Change of Employment ................................... 24
List of Guarantors .......................................................................................................... 25
2
Dear Employer:
The Federal Family Education Loan Program (FFELP) provides low-interest loans for
postsecondary education. This program is administered by guarantors, such as
ASCENDIUM on behalf of the federal government. When borrowers fail to repay these
loans, one of the methods for collecting payment on these defaulted FFELP loans is
Administrative Wage Garnishment. AWG permits wage garnishment without the
issuance of a court order. A federal statute (20 USC 1095a et. seq) that supersedes
state law authorizes this process. The text of the federal statute authorizing
Administrative Wage Garnishment appears on pages 10-11 of this Employer Handbook.
Please read carefully the details and instructions that follow in the attached Employer
Handbook. An Order of Withholding from Earnings, accompanied by the Employer
Handbook is being provided to you because valid records indicate your employee is a
debtor who has defaulted on a FFELP loan. Prior to our contact with you, notification of
this debt was provided to the debtor. He/she was allowed sufficient opportunity to
review ASCENDIUM records relating to the debt, make voluntary arrangements to
resolve the debt or be granted a hearing regarding any existing disputes.
We anticipate you will do your part to ensure borrowers who were assisted by the
FFELP loan program repay their debts. Your cooperation with the AWG program will
allow others to continue to receive assistance to pursue postsecondary education,
which results in a more educated workforce. Additionally, you are contributing to the
reduction of taxpayer dollars necessary to fund the loan program. Thank you for your
participation. If after reading the following document in its entirety, you have questions,
please contact the collection agency listed on the Order of Withholding from Earnings
that you received.
3
THE STUDENT LOAN PROGRAM
PROGRAM OVERVIEW
The Federal Family Education Loan Program, formerly called the Guaranteed Student
Loan Program, was created by the Higher Education Act of 1965 in an effort to provide
incentives for the use of private capital to fund low-interest, long-term loans for
postsecondary education. Students go to private lenders for an education loan, and the
lender¡¯s risk is nearly eliminated by a guarantee from the federal government.
Guarantors such as ASCENDIUM handle the administration of the loan program at the
state level on behalf of the federal government. Guarantor administrative responsibilities
include the loan guarantee, claim payment, compliance with student loan regulations,
and collection of defaulted loans. When a student fails to repay the loan and enters
default (becomes 270 days past due), the holder of the loan(s) files a claim with the
guarantor to cover the amount. The guarantor examines the claim to ensure that it
was properly serviced by the lender, and pays the lender. Once a claim is paid, the
guarantor files for reinsurance on the loan(s) with the U.S. Department of Education.
At the same time, the guarantor begins collection efforts by contracting with various
collection contractors. These contractors use various tools, including phone calls,
letters, and withholding federal (and in some cases, state) tax refunds and other benefit
payments from defaulted borrowers.
DEFAULT RATES
Most students repay their debts. Approximately 15 percent of borrowers in this program
fail to repay their loans. Many of these borrowers are employed and able to make
payments.
DEFAULT PREVENTION and COLLECTION
The FFELP offers a variety of incentives and penalties designed to prevent student loan
defaults. As a result, guarantors have substantially increased default prevention
efforts. In addition, Congress has passed a law that will help guarantors and the
Education Department collect on these defaulted loans through the administrative
withholding of a defaulted borrower¡¯s wages.
LEGISLATIVE AUTHORITY
Public Law 102-164; 20 U.S.C. 095(a)
?
1
et seq. allows ASCENDIUM administratively
garnish up to 15 percent of the debtor¡¯s disposable pay until the defaulted loan has been
paid in full. This law supersedes any state¡¯s laws governing wage garnishment.
ASCENDIUM believes wage withholding will encourage many defaulted borrowers to
repay their loans. In those cases where borrowers continue to refuse to honor their
obligations, wage withholding becomes an effective debt-collection tool.
4
COLLECTION AUTHORITY
The Education Department permits a guarantor to contract with a collection contractor to
perform, on the guarantor¡¯s behalf, many of the activities needed for the agency to collect
by AWG under the federal regulations governing AWG (34 CFR 682.410(b)(9). Such
administrative activities include the identification of suitable candidates for wage
garnishment if done in accordance with specific standards adopted by the guarantor;
obtaining employment information on these individuals for the exclusive purpose of
garnishment; sending candidates selected for garnishment a notice prescribed by the
guarantor to explain the garnishment action the guarantor proposes to take, the debtor¡¯s
right to object to the proposed action, and an opportunity to negotiate an alternate
repayment arrangement; responding to inquiries from notified candidates regarding
requests for documents pertaining to the debt, for a hearing, or for repayment
arrangements and negotiating such arrangements; and receiving garnishment payments
from a debtor¡¯s employer.
5
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