Lawmakers Push Relief From Withheld Tax Refunds for More Student Borrowers During COVID-19 Outbreak

By Joelle Fredman, NASFAA Staff Reporter

On March 13, President Donald Trump declared a national emergency due to the novel coronavirus outbreak — which also became the date on which the Department of Education (ED) announced it would retroactively apply a policy to stop requests to withhold the wages, tax refunds, and Social Security benefits of borrowers who are in default on their federal student loans for at least the following 60 days. However, a group of Democratic lawmakers sent a letter to Education Secretary Betsy DeVos Friday arguing that the date does not reach far back enough to support borrowers impacted by COVID-19. 

In an announcement last week, ED wrote that, in addition to halting the withholding of  tax refunds moving forward, it would also be refunding approximately $1.8 billion in offsets, such as federal income tax refunds, to more than 830,000 borrowers, which were in the process of being withheld on March 13.

In Friday’s letter, the lawmakers — Reps. Richard Neal (D-Mass.), Bobby Scott (D-Va.), Linda Sánchez (D-Calif.), and Sens. Ron Wyden (D-Ore.), and Patty Murray (D-Wash.) — wrote that student borrowers who filed their taxes at the start of the tax season, which began on January 27, should be refunded the amount garnished from their tax refunds to ensure they also have extra funds in their pockets during this time of economic uncertainty.

In fact, between January 27 and March 13, the lawmakers wrote, 73.5 million federal tax returns had already been processed, and 59.2 million were eligible for a federal tax refund. Plus, many of those returns filed early in the tax season, the lawmakers argued, belong to low-income borrowers who may be hit the hardest during the virus outbreak, “as they rely on their federal tax refunds to purchase basic necessities and pay their rent,” such as the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). During the 2019 tax filing season, $3.2 billion was offset from 1 million federal tax returns with EITC and ACTC refundable credits, they noted. 

“According to the National Consumer Law Center, the consequences of offsets are devastating. And, in light of the COVID-19 pandemic, we are deeply concerned that the economic impact of these offsets could be even more devastating this year unless the money is returned immediately to these borrowers,” the lawmakers wrote. 

For more information and resources on how the spread of the novel coronavirus is impacting student financial aid, please refer to NASFAA's COVID-19 Web Center.


Publication Date: 3/31/2020

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