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March 30, 1998

State commission steps up efforts to collect on defaulted student loans

By Barbara McKenna

Last year, defaults on federally guaranteed education loans cost U.S. taxpayers $2.5 million. In an effort to cut these losses, Congress enacted a law authorizing student loan guarantors to withhold a portion of defaulted borrowers' wages to repay their loans.

The California Student Aid Commission, the state's student loan guarantor, announced recently that it will make fuller use of this law in order to regain lost loan money. The commission announced that those who have defaulted on loans and not responded to previous collection attempts will be targeted through the Administrative Wage Garnishment Program.

Employers of those who have defaulted on student loans may be contacted and required to withhold a portion of paychecks until financial obligations have been fulfilled.

Wage withholding is an administrative process for which no court action is needed. Employees who have defaulted on student loans will be informed by the commission prior to wage withholding and given an opportunity for appeal under certain conditions.

At the same time that the California Student Aid Commission is stepping up its efforts through the Administrative Wage Garnishment Program, it is also providing liberal voluntary repayment terms for those who wish to avoid wage garnishment. For more information on voluntary repayment options, contact the Defaulted Borrowers' Hotline at (800) 367-1589 or send written inquiries to California Student Aid Commission, Internal Collections Branch, P.O. Box 419032, Rancho Cordova, CA 95741-9032.

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