My friends, I really, really want you to think twice about student loans – especially those taken out at proprietary vocational trade schools. Here is why: An August 2009 U.S. Government GAO report noted a disturbing trend. (U.S. Gov’t Accountability Office, GAO-09-600, Proprietary Schools: Stronger Deparment of Education Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid (August 2009))

According to the GAO, four years into repayment, a whopping 23.3% of students at proprietary schools were defaulting upon federal loans, a higher rate than students at either public colleges, where 9.5% were defaulting, or private ones, where 6.5% were in default.

Student loans can be really, really damaging. The damage can extend forever. Keep checking/searching this blog for frequently updated student loan related posts.

Here are a few things you should know about student loan collections:

Most defaulted student loan garnishments are quite a bit different than say "normal" medical bill lawsuit garnishments – for starters, most student loan garnishments are limited to 15% of disposable income, which is more liberal than either a child support garnishment or a 25% normal creditor garnishment. While the differences between student loan garnishments and normal garnishments are too vast to fully explain here, I leave you with a few important points.

First, under the Higher Education Act and the Debt Collection Improvement Act of 1996, most student loans can be garnished without a normal lawsuit, judgment and writ/court order. This is a big difference – there is little chance for you to go to court to contest entry of the judgment on your defaulted student loan collection. The student loan garnishment just starts unexpectedly out-of-the blue.

Second, the exemption on the garnishable portion of wages is more liberal with student loan garnishments than with "normal" creditor garnishments. With federal student loan garnishments, the exemption amount is thirty times the minimum wage so you only lose the LESSER amount by which your income exceeds 30 times the current minimum wage or 15%. For example, if you have weekly disposable pay of $300.00, then you definitely get to keep $217.50 (30 times the current minimum wage of $7.25/hour, $300 – $217.50 = $82.50), but you don’t have to pay $82.50 weekly BECAUSE you get a “bonus” – since 15% of $300 is only $45 (.15 x 300 = $45), you only are garnished $45 instead of $82.50. What a deal!

Third, a 15% student loan garnishment will not freeze out other creditors, so if the Department of Education or some student loan guarantee agency or its collector is garnishing 15%, then at the same time Ford Motor Credit shows up with a repo-ed vehicle deficiency judgment garnishment, then 15% goes to the Department of Education and 10% of your net wage goes to Ford Motor Credit, up to a total of 25% garnished from your net pay.

Fourth, while a bankruptcy will usually not eliminate student loans (but note that you can seek a “hardship” discharge of student loans while in bankruptcy) you can usually temporarily eliminate student loan garnishments while in a Chapter 13 plan.

Fifth, student loans are awful – student loans can even garnish (offset) your social security benefits when you are old and retired (and perhaps even when disabled) and living on a fixed income.

Sixth, Washington law is very unfriendly with defaulted student loans. Even though you are being garnished 15% for the defaulted student loan, you can still lose your job/occupation license if you owe defaulted student loans – your professional license may be revoked for defaulted and unpaid student loans in occupations including but not limited to the following jobs: lawyers, accountants, architects, auctioneers, cosmetologists, barbers , manicurists, boarding homes, contractors, embalmers, funeral directors, engineers, land surveyors, escrow agents, birthing centers, poison center directors, poison center specialists, real estate brokers, real estate salespersons, landscape architects, water well contractors, plumbers, health professionals, real estate appraisers, fire system sprinkler contractors, private investigators, security guards, and bail bond agents.