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Calif. Bill To Ban Lenders From Garnishing Graduates’ Wages

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SACRAMENTO (AP) — Graduates struggling to repay private student loans could get a reprieve under legislation that passed the state Assembly on Thursday.

The bill from Assemblyman Bob Wieckowski, D-Fremont, would prevent private lenders from garnishing the wages of indebted former students.

Wieckowski said the creditors are allowed to withhold up to 25 percent of a delinquent borrower’s disposable income. Preventing such automatic withholding would encourage lenders to create manageable repayment plans for graduates, he said.

“The amount of private student loan debt is growing,” Wieckowski said. “It’s placed an inordinate burden on underemployed graduates.”

The bill, AB233, would not affect the government’s ability to tap wages for the repayment of federal student loans.

Supporters said the increasing burden of student loan debt, which cannot be eliminated during bankruptcy proceedings, endangers the state’s economy by limiting young adults’ ability to buy homes and make other investments.

Republican lawmakers who opposed the bill said it would be unfair to private lenders if the federal government could continue garnishing wages while private lenders cannot. The strategy is one method they use for ensuring debts get repaid.

Access to private loans could shrink as a result, opponents said.

“You may dry up the market of private loans being accessible in the future,” said Assemblywoman Shannon Grove, R-Bakersfield.

The legislation was sent to the Senate on a largely party-line, 50-22 vote. GOP lawmakers opposed it, along with Democratic Assemblyman Mike Gatto of Los Angeles.

(© Copyright 2013 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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