Democrats Call on ED to Issue Updated Guidance to Stop Wage Garnishment of Defaulted Borrowers

By Owen Daugherty, NASFAA Staff Reporter

A bevy of Democratic lawmakers signed on to a letter Thursday urging the Department of Education (ED) and Treasury Department to issue new guidance ensuring defaulted student loan borrowers no longer have their wages garnished during the ongoing pandemic. 

The letter, organized by Sen. Cory Booker (D-N.J.) and Rep. Ayanna Pressley (D-Mass.), comes after reports that some borrowers are still having their wages garnished in spite of a new policy implemented under the federal stimulus package that called for the practice to be halted for six months amid the pandemic caused by the novel coronavirus.

“For the hundreds of thousands of struggling student loan borrowers who were seeing their hard-earned wages unfairly garnished, this protection is a critical lifeline and will undoubtedly be the difference between whether these families can pay rent, put food on the table and cover the costs of medical care,” the lawmakers wrote to Education Secretary Betsy DeVos and Treasury Secretary Steve Mnuchin.

The letter also calls on ED to release more data about how many defaulted federal student loan borrowers are still having their wages garnished and provide a clear timeline for when refunds can be expected to go to those who have had their wages “unlawfully garnished” since ED’s announcement late last month to halt wage garnishment.

The letter — signed by more than 30 House and Senate Democrats — contends that ED has had trouble implementing the new policy and as such has left borrowers vulnerable to still having their wages garnished if they are in default on their student loans.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law last month, halted the practice of wage garnishment for six months in an effort to protect vulnerable borrowers. It expanded on ED’s announcement to cease the practice for a period of 60 days, which retroactively went into effect March 13, 2020, the day President Donald Trump declared a national emergency in response to the pandemic.

“Despite these statutory requirements, the Department and its contracted private collection agencies, appear to be moving forward in blatant disregard to these new protections established by Congress,” the letter asserts.

Additionally, the letter contends that ED issued contradicting guidance regarding the wage garnishment on defaulted student loans.

On March 25, ED announced it had stopped 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 next 60 days.

Subsequently, ED issued updated guidance that stated if borrowers’ wages continue to be garnished, borrowers should expect refunds in the future. But the Democrats’ letter notes that “the guidance provides borrowers with no timeline on when they can expect to receive their refunds.”

In a statement to NASFAA, ED said that if it receives funds from a garnishment between March 13 and September 30, it will refund those garnished wages.

Furthermore, ED clarified that “the borrower’s employer is the entity that actually stops the wage garnishments.”

“To facilitate this, the Department’s default student loan servicer has already started reaching out to employers to advise them to stop garnishing wages of defaulted borrowers with federally-held student loans,” said a spokesperson for ED. “So far, the employers of more than 135,000 borrowers have been contacted.”

The lawmakers demanded answers to their list of questions and concerns by no later than April 25. 

 

Publication Date: 4/20/2020


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