George Kamel - The Government Is Coming For Millions of Paychecks

Starting point is 00:00:05 Well, the government's coming for our paycheck. Well, not all of us, but 5.3 million people. That's right, the Trump administration is resuming collection efforts on defaulted federal student loans, and that includes wage garnishment, a.k.a. taking money directly from your paycheck. So who exactly does this apply to? How much can they legally take from your check? And what can you do about it? Today, we're going to break down how this wage garnishment works, what it means for you, and what some experts are warning could happen next.

Starting point is 00:00:35 Okay, first of all, let's talk about. about why this is happening and why now. Back in March of 2020, federal student loan collections were paused because of the pandemic. The government hit the brakes on wage garnishment to give borrowers some breathing room. But now the Trump administration has said, No more Mr. Nice government. And just like that, collections are back, and they're coming for borrowers who defaulted. Highly qualified U.S. Secretary of Education Linda McMahon, seen here giving her daughter the most public education possible, posted this video laying it all out. In case you missed it, the Department of Education announced that on May 5th, we will restart collections of student loans and default.

Starting point is 00:01:12 The federal student loan portfolio stands at nearly $1.7 trillion, and only four in 10 student borrowers are in repayment. Unlike the previous administration, who made false promises and pushed an illegal student loan bailout, we will not force American taxpayers to take on the debts that are not theirs. There's no such thing as forgiveness, just shifting the payment burden from one party to another. Borrowers should pay back the debts they take on. So who exactly is going to get their wages garnished? It's people who are in default. And for most federal student loans, you're considered in default if you haven't made a payment in more than 270 days, which is about nine months.

Starting point is 00:01:54 So if you've been ghosting Uncle Sam for the full length of the human gestation period, get ready. Because your loans are full term, baby. Contractions are two minutes apart. It's go time. Bring the mini fridge. They don't have fringes in the hospital room. Ask me how I know. You want to drink a lukewarm Lecroy? What cruel Guantanamo hell have you created in this room? Boy, these are deplorable living conditions. Okay, I may have overextended the metaphor, but you get what I'm saying.

Starting point is 00:02:18 The Education Department said in a press release that 5.3 million borrowers will get notices later to the summer about the collection activity of their wages. And if you're one of those 5.3 million, you might be wondering how much they can actually take from your paycheck. while the government can garnish up to 15% of your disposable after-tax income. But legally, they have to leave you with at least 30 times the federal minimum hourly wage. So multiply that by 30, and that means they should leave you with at least $217.50 per week. Which I think we can all agree, it's less than ideal. And if you're collecting Social Security, they can take up to 15% of that, too,

Starting point is 00:02:52 as long as it leaves you with at least $750 a month. But good news if you're self-employed or a gig worker, If you're getting that sweet 1099 income, wage garnishment does not apply. Not because you're special or anything, just because, you know, there's no employer to garnish from. So Uber drivers rejoice, at least until you pick up your next Prius load of intoxicated bachelorets. Welcome to Nashville. Shut up. Pedal caverns. They have them here? That's why I wore a rumpur.

Starting point is 00:03:17 Oh, come on. So what should you do if you're one of the $5.3 million whose wages will be garnished? Well, first of all, don't panic. You can't go to jail for defaulted student loans. And no matter how far behind you are on payments, you can get back in good standing. Here's some ways to get your student loans out of default. And if you don't have student loans, skip to this part of the video because I've got to cover something that is very sinister that could still affect you. I'll wait.

Starting point is 00:03:41 Okay, now that they're gone, let's talk directly to the student loan borrowers who are in default. One option is to pay back your entire balance. Now, let's be honest, this isn't doable for most people. But if you have private student loans, you might be able to negotiate a settlement with your lender. This is where you pay less than you owe in one lump sum. So if you can swing it, go with this option and get rid of the debt altogether. But don't take out a personal loan to pay off your student loan. You'll just be signing yourself up for worse terms and a higher interest rate.

Starting point is 00:04:08 Another way to get out of default is rehabilitation. In most cases, this is your best option. With rehabilitation, you have to make nine monthly payments within 10 months. And those payments are usually 15% of your discretionary income, which is the amount of income you have left over after essential expenses are taken care of. This gives you some time to focus on covering the basics while also getting your student loans back in good standing. But here's the key. You can only rehabilitate your student loans once.

Starting point is 00:04:33 So make sure you understand all the terms and use this to jumpstart the process of paying off your loans for good. Another option is consolidation. Now, normally, I never recommend debt consolidation. But student loans are the one exception where it could make sense. You can combine your multiple federal student loans into one loan for free through the government with a direct consolidation loan. Your student loans will no longer be in default. and you'll get a new fixed interest rate. But it may drag out the length of your loan, which I'm not a fan of,

Starting point is 00:04:59 and that can cost you way more money in the long run. And like rehabilitation, you can only consolidate your federal loans once. So if you choose to go this route, use it to boost your progress, not slow it down. Throw as much extra money as you can at your loan until it's completely gone. And if you want to talk through your options, you can contact the Education Department's default resolution group and make a plan. I will drop a link to their website in the description in case you need it. Now, another thing you could do is challenge the garnering.

Starting point is 00:05:25 You'll get a 30-day notice before garnishment starts, and that notice should have info on how to request a hearing before to judge. You might have a case if you've recently been unemployed, you've recently filed for bankruptcy, or if the garnishment will result in financial hardship. And that might buy you some time, but you gotta stop kicking this can down the road and focus your efforts on paying off this debt, so nothing like this ever happens to you again. And for those of you who have student loans, but you've been making your payments, don't just shrug this off because it doesn't apply to you. Even if you're not in default, you're throwing away so much money on interest,

Starting point is 00:05:55 by just making minimum payments. Looking at you, Caleb Hammer. That's 2.5. It's actually, I'm finessing the system. No, bro. You got finessed. Love you, buddy. So let this be your wake-up call to get rid of these loans as fast as you can. Alright, if you skipped ahead, welcome back folks who don't have student loans. So if you don't have student loans because you've already paid them off,

Starting point is 00:06:16 you avoided them all together, good for you. Honestly, this really shouldn't affect you all that much. One could argue that the economy might take a hit all these people who are having their wages garners, start spending a lot less, but I don't expect this to affect consumer spending at all. Now, for the rest of you still paying back your loans, some experts are warning,

Starting point is 00:06:32 this could trigger something else a little more sinister that you might need to watch out for. And I'll tell you what it is, but I kind of want to talk about my sheets first because they are insanely comfortable. I got them from Cozy Earth, a sponsor of today's video. Cozy Earth sheets are soft, smooth, and so ridiculously comfortable

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Starting point is 00:07:11 description. And before we get back to the student loan stuff, let's talk about your savings. If you've got a lot of money sitting at a norm core run-of-the-mill savings account earning dismal interest, it's time to upgrade to a high-yield savings account like the one offered by online bank Laurel Road, one of the sponsors of today's video. It's a financial no-brainer because with Laurel Road, your account balance earns top-tier APY, so you'll be earning some sweet interest on that emergency fund or short-term savings. Plus, with Laurel Road, there's no minimum balance required to open an account, your deposits, your FDIC insured, and there's no hidden fees. So learn more and get started today by going to Laurelroad.com slash George, or use the link in the description below. That's

Starting point is 00:07:48 Laurel Road.com slash George. Okay, back to wage garnishment. Some experts think all of this action will trigger something else, and that is, more student loan scams. You see, shady criminals can use information from lead generators or online data brokers to find people who are seeing their credit decline because they aren't paying their bills. Then they call or text those people offering to get them a lower monthly payment or debt cancellation in exchange for a high upfront fee. But anyone offering help with your student loans for an upfront fee is a huge red flag. run far away. Another scam to watch out for is when someone tricks borrowers into paying for something they could do for themselves for free, like signing up for an income-based repayment plan.

Starting point is 00:08:25 You can do that yourself at student a.gov or by reaching out to your loan servicer. You don't need to pay someone to do it. And even if you're being contacted by a real company, you should still be careful. Because according to the Better Business Bureau, some of these companies are real, but they pitch their services with false claims and incomplete information. So if you've got student loans, get ready to decline some sketchy calls and report some creepy texts. Especially if they're green. Never trust a green text. I'll never trust anybody again.

Starting point is 00:08:51 Now, whether you have student loans or not, there's a few things we can all take away from this. Number one, debt is not your friend. And not just student loan debt, I'm talking car payments, credit cards. It's all the same trap with different bait. So if you have any looming debt, deloom it. Don't wait until Uncle Sam makes a surprise appearance

Starting point is 00:09:07 in your checking account, like that auto-renewing Duolingo subscription you forgot about. Give up on the years, Chad. It's not going to happen. You don't have the chutzpah. Real chutz by saying that. Number two, don't count on the White House to take care of your house. Administrations change and so do their policies.

Starting point is 00:09:24 It wasn't long ago they were dangling student loan forgiveness in our faces, and now they're coming after our bank accounts. So you need a plan that works no matter who's in charge. Number three, don't let your kids take out student loans. Talk to them about avoiding debt, choosing affordable schools, getting scholarships, working part-time to cash flow college. Do not let them fall into this trap. And if you want to know more about how to avoid all the marketing gimmicks,

Starting point is 00:09:44 the financial traps that are out there, be sure to check out my book, Breaking Free from Broke, the ultimate guide to more money and less stress. It's also available as an audiobook, read by yours truly, and you can get your copy with the link in the description below.

Starting point is 00:09:56 And if you want to know the best way to pay off all of your debt fast and for good, keep watching this next video or click the link in the description below. Don't forget to like, subscribe, and share this video with all of your friends. Okay, thanks, bye.

George Kamel - The Government Is Coming For Millions of Paychecks

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