Imagine this: one day your boss pulls you into his office, sits you down and says there is a problem. However, their work itself was impeccable. But he doesn’t want to talk to you about work – he wants to talk to you about your credit report.
You see, when you got hired, you agreed to have your employer prepare your credit report (perhaps unknowingly by simply signing a form in your hiring package). And now, for some reason, your boss is letting you know that HR has concerns about your debt. Suddenly you go from being a star employee to looking for a job.
You already know student loans suck. It is a fact of life. But did you know that you could get fired with your student loan debt? It happened and here are eight reasons why it happened and what you can do to prevent it.
If you’re not entirely sure where to start or what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you create a solid financial plan for your student loan debt. cash The student loan planner Here.
1. You become distracted from your debt
It’s difficult because it’s totally subjective. Your employer may be concerned that you are distracted and unproductive because of your student loan debt. Your employer may fear that your debt payments will become unmanageable and that you will come under pressure while you work.
Getting calls, emails, or even letters about your work-related debt could hit the coffin beyond your student loans and creditworthiness.
The bottom line is that you need to keep your student loan debt away from your job or you could be laid off.
2. They are considered unreliable
The sad fact is that many people view high debt as a character flaw. Your boss may think you can’t manage your finances, so you probably can’t get a job done. It doesn’t matter that you took on this debt to go to school and improve yourself.
Many employers do credit checks during the hiring process, and large debts (including student loan debt) can mean you won’t get the job.
But many companies have a delay before this is discovered. For example, this woman was fired after six months of work for taking so long to discover her debt. Imagine working a new job for six months before getting laid off because of your student loan debt! That’s awful.
3. Debt and cash handling do not go together
If you are in contact with cash or the company’s bank accounts, your employer may fear a shortage and you could be the cause. Back to # 2 above, you may have character concerns and think that you could use the company’s money as an easy way out of your own student loan problems.
If you work in the banking or financial services sector, the institution will regularly withdraw an employee’s loan – every six months or annually. If you state that you have a lot of student loan debt or are concerned about making your minimum monthly payment, you are classified as high risk. And in return, you can be terminated for those student loan debts.
4. You must comply with a security clearance
If you’ve got a job that requires a security clearance (and there have been over a million public and private sector jobs that have had a security clearance), you’re under a credit check. Student loan debt shouldn’t hurt you, but if you default on student loan debt, you could get fired. The risk is that you could be bribed by a foreign government to repay your student loan.
Some contractors may even hire you, try to get you clearance, and if your credit doesn’t clear you, they’ll fire you. If you are in the military, you may be demoted or reassigned.
But in most cases, they don’t just revoke your clearance – they fire you too.
5. Your employment contract states that you must maintain a “good” credit rating
Many companies use employment contracts when hiring. The fine print of many of these contracts is buried in sentences such as, “The employee must have a good credit rating or a higher credit rating …” It’s very vague, but it also gives employers a reasonable reason to fire an employee if they are in debt for one Has student loan.
It’s important to note that it’s not just about having student loans – but having too much student loan debt can be. If your debt-to-income ratio is over 50%, your employer may be concerned and depending on your contract, you may be terminated.
6. Workplace rules require that you maintain “good” creditworthiness
If you work in a low-wage job, you may not have an employment contract – you likely have some workplace rules or an employee handbook. This is tantamount to an actual employment contract, and you are required to follow these rules even if you haven’t signed a specific contract that promises to do so – it’s part of the terms and conditions of employment.
In this case, if workplace regulations dictate that you must maintain good credit, you could also be fired for student loan debt and other credit problems.
Related: How to get a free credit report and credit score
7. You are causing a loss to your business
As crazy as it sounds, you can get fired if you harm your business while working in the financial services industry. For example, if you work for a bank that has issued your student loans and you fail to repay them, you are causing a loss to your employer – and you can get fired for it.
While it’s not common, paying back your student loans to your employer is tantamount to stealing, and employers have laid off employees for just that. And as if the layoff wasn’t bad enough, chances are your employer is still persecuting you as a believer.
8. You get your wages garnished
Finally, you can also be fired if your wages are seized due to your student loan debts. However, you cannot be fired for just one garnishment of wages – it is illegal. But if you have two or more garnishments, you can get fired.
So if multiple student loan lenders garnish your wages, you could lose your job. Or, if you have a student loan lender and another creditor garnishing your wages, you could lose your job too.
What an employer can do under the law
To request a credit check
Under the Fair Credit Reporting Actan employer can demand that an employee undergo a credit check. In order to carry out a credit check, the employer requires the employee’s express written consent. Most employers, however, simply do this when they hire a new employee and add an opt-out check box to the bulk of employment forms that will have you signed on your first day. However, it is perfectly legal to terminate an employee who does not undergo a credit check (in most places). It’s like declining a drug test.
You should know what this credit check says. Track your credit balance for free with Credit Karma or check your annual report on AnnualCreditReport.com.
About the result of a credit check
This depends entirely on your employment contract. If your employment contract states that your employment is contingent on maintaining good credit, your employer will can fire you for your student loan debt.
However, if you don’t have an employment contract (as is the case with many low-wage jobs), you’ll need to check your employee handbook or workplace rules. Similar to an employment contract, when there are rules that require good credit, you can be terminated.
Finally, if there are legitimately no rules governing credit scores and credit reports in the workplace, United States law applies. United States Code, Chapter 11 says it is so It is illegal for an employer to terminate an employee Simply because of bad credit or bankruptcy. This is the same code that governs bankruptcy law. However, this doesn’t apply if an employment contract or workplace regulation provides otherwise – so it still depends on it.
the Consumer Credit Protection Act states that an employer can not terminate an employee for garnishment of wages.
However, it is legal to call an employee on account of more than one Garnishment of wages.
That said, if you have problems with student loan debts and more than one creditor comes after your salary, you could lose your job.
How do you know where you stand
The best defense against a student loan layoff is knowing where you stand. This means that you can check your credit report regularly and never miss out on a student loan payment. You should also check your creditworthiness before you start looking for a job.
If you want to check your credit report there are many free services like Credit Karma that not only show you your credit score but also tell you what to do to improve yourself. We love credit karma because it’s free and they have a lot of great tools to help you improve your credit score. They also have monitoring in place that can be used to ensure that you maintain your creditworthiness over time.
If you are ever called to your employer’s office to discuss your creditworthiness, don’t accept being fired. This is not common, and in most cases, your employer will work with you to improve your credit score. Many larger companies offer employee services that can help – like free financial planning. And even if you don’t use it, you can just tell your employer your debt settlement plan and offer them updates and check-ins to save your job.
Have you ever been threatened with dismissal because of your student loan debt? Do you know someone who was fired for their student loan?