Issue: You receive an order to withhold 10 percent of disposable income from an employee's wages for the repayment of a state university administrative student loan. When you open the employee's file, you notice that she is already under a withholding order for repayment of another university's administrative student loan. There are no other garnishment orders for this employee, and the total of the two orders does not exceed 25 percent of disposable income (the maximum amount of an employee's wages that may be garnished under federal law and the law of your state). So, you send a memo to Payroll to begin withholding the additional 10 percent from the employee's wages for repayment of the second student loan. You also send a notice of the withholding order to the employee.
Upon receiving the notice, the employee calls you complaining that the second loan repayment withholding is illegal. Who is right?
Answer: The employee is correct. The garnishment of 20 percent of an employee's disposable income to satisfy two separate administrative student loan garnishment orders violates federal law governing repayment of student loans.
Generally, no more than 10 percent of an employee's disposable income may be withheld to satisfy a student loan garnishment issued under the Higher Education Act of 1995. Although you contend that a higher garnishment limit (25 percent of disposable income) is permitted under the Consumer Credit Act, in the case of student loans a different rule-the Higher Education Act of 1995-governs.
Under the Higher Education Act of 1995, garnishment under an administrative student loan is limited to 10 percent of disposable income. Further, regulations set forth under the Act provide that the amount garnished for repayment of a student loan may not exceed the lesser of 10 percent of disposable pay or the amount permitted by the Consumer Credit Protection Act.
Cite: Green v Kentucky Higher Education Assistance Authority and State of Alabama, DC AL, Dkt No 97-1022-RV-C, February 23, 1999.
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