Question

Under the Consumer Credit Protection Act, what is the maximum percentage that can be deducted from an employee's pay to satisfy a student loan garnishment? What do you think of this law?

Answer 1

Wage garnishment is a process of allowing deduction of some portion in employee’s income in order to allow for the payment of a debt owed by the employee to a third party.
According to Consumer Credit Protection Act Student loan wage garnishment refers to either loan granted by Federal Government or private lenders.
Hence we have to refer deductions under two cases
Loan granted by Federal government which doesn’t need to obtain a court order to garnish wages.
The maximum percentage that can be deducted from an employee’s pay to satisfy a student loan garnishment is 15% and not more than 30 times of the minimum wage.
As per the schedule of payroll, the maximum garnishment limit can be determined. See the below table
Payment Cycle
Amount

Weekly
$217.50

Biweekly
$435.00

Semi-monthly
$471.25

Monthly
$942.50

In case of private lender student loan, the employee should obtain a court order for garnishment of student loan in his/her wages.
The maximum percentage of deduction depends on the state which is up to 25%.
The time limit varies between 3-15 years. Six years after loan is default statute of limitation of private student loans.
Consumer credit Protection Act allows employees in paying the loans which cause an undue financial hardship.