Adminstrative Wage Garnishment Information for Employers

The following provides guidance to employers who have received a Order of Wage Withholding from EdFund.

• Overview
• Wage Garnishment Process
• Employer Responsibilities
• Employer FAQs
• Additional Questions

Overview

Billions of dollars are lent annually to individuals seeking education beyond high school, and most repay their student loans. A small percentage of borrowers don't and their loans default with their lenders. The California Student Aid Commission (CSAC) is responsible for purchasing the defaulted loans it guaranteed from a borrower's original lender. Its servicer, EdFund, locates the borrower and collects on the defaulted loan. EdFund uses all available collection tools, and one of the most effective is wage garnishment. Because the garnishment amount tends to be much larger than the minimum payment otherwise required, even the prospect of wage withholding often provides sufficient incentive for the garnishee to contact EdFund and negotiate a repayment agreement. Federal law authorizes the U.S. Department of Education and Federal Family Education Loan Program guaranty agencies to collect defaulted federally guaranteed student loans via an administrative order to employers. Garnishment can be demanded without obtaining a court order. Employers are required to withhold and pay up to 15% of the debtor's disposable pay to the guarantor. Federal law supersedes any state law governing wage garnishment.

Wage Garnishment Process

Because CSAC is both a guaranty agency and an agency of the state of California, it has access to quarterly and annual income information on its defaulted borrowers. If a defaulted borrower meets the minimum income criteria, a Notice Prior to Wage Withholding is sent to them offering the opportunity to request a hearing on the garnishment. If the borrower has not requested a hearing after 35 days, an Order of Wage Withholding is sent to all employers actively employing the borrower according to the records available to CSAC.

Employer Responsibilities

If you receive an Order of Wage Withholding, you are required to: Complete the “Acknowledgment of Order of Withholding from Earnings” and fax it to EdFund at 916.526.7209. Begin garnishing the borrower's disposable wages at a rate not to exceed 15% of those wages. (This assumes we have matched the Social Security number associated with the defaulted loan with your employee.) Forward EdFund payments a minimum of once every 30 days:

EdFund
Accounts Receivable
PO Box 419040
Rancho Cordova , CA 95741-9040

EdFund may choose to suspend garnishment if a borrower establishes a repayment agreement or is determined to be eligible for the cessation of collection activities. If EdFund determines a suspension is in order, you will be sent a “Garnishment Suspension Notice.” Upon receiving this letter, you must immediately stop garnishing the borrower's wages until further notice. If the suspension of collection activity is lifted, you will be sent a “Suspension Removal Notice” and must restart the garnishment.

Frequently Asked Questions

1. How often must I send payments to EdFund?

A minimum of once every 30 days.

2. My records show I've sent enough funds to pay off the loan. Why are you telling me to continue garnishing?

A student loan accumulates interest and collection costs per federal regulations. As a result, your records and the balance due may differ. Do not cease garnishment activity until EdFund notifies you in writing.

3. I'm already garnishing this person's wages for another entity. Do I have to comply with your Order of Wage Withholding?

• Garnishing more than 25% of the employee's disposable income? Notify EdFund that your employee has a “higher priority debt.”
• Garnishing less than 25% of the employee's disposable income? Forward EdFund no more than 15%, with an overall total not to exceed 25%.

Example 1: Employee garnished 20% by entity A; send EdFund 5%
Example 2: Employee garnished 5% by entity A; send EdFund 15%

4. I was told my state doesn't allow wage garnishment. Do I have to comply with your Order of Wage Withholding?

Yes. Federal law 31 U.S.C. § 3720D(a) expressly provides that garnishment orders issued under its authority take effect regardless of state law.

5. The name on your Order of Wage Withholding differs from the name of my employee. Must I still garnish his or her wages?

Yes. To avoid significant federal legal issues, it is imperative that you comply with the Order of Wage Withholding. However, we recommend that you advise your employee to contact EdFund 's Post-Default Services Unit at 800.367.1590. Once your employee provides documentation and Post-Default Services determines that your employee is not responsible for the debt, we will contact you in writing asking that you discontinue the garnishment.

6. How do I determine an employee's disposable income?

Calculate the sum of all his or her gross earnings including: salary, overtime, vacation, sick leave, bonuses, tips and commissions. Subtract from that figure the sum of the following mandatory deductions: Federal income tax, Social Security, Medicare, state income tax, state disability tax, city/local taxes and any involuntary retirement or pension plan payments. This will give you the disposable income figure; 15% of that amount should be forwarded to EdFund.

Additional Questions

If you have more questions, please contact EdFund's Post-Default Services Unit at 800.367.1590 or via e-mail at pds@edfund.org. The U.S. Department of Education also has an excellent employer's handbook for your reference. You can download it by clicking the link below: