Consumer Groups Sue DeVos Over Student Loan Wage Garnishment

By Owen Daugherty, NASFAA Staff Reporter

Education Secretary Betsy DeVos is facing allegations that the Department of Education (ED) is continuing to garnish the wages of borrowers who have defaulted on their federal student loans, according to a new lawsuit.

The class action lawsuit, filed Thursday in a federal court in Washington, D.C. on behalf of roughly 285,000 borrowers, alleges ED is still garnishing paychecks in spite of a provision included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that halts the practice through September 30 to provide relief to borrowers during the COVID-19 pandemic. The lawsuit puts additional pressure on ED, which has already been accused of not doing enough to halt wage garnishments.

Lead plaintiff Elizabeth Barber, a New York woman who works as a home health aide, said she earns $12.36 an hour and has had her hours reduced since the start of the pandemic. She said she had $10,000 in federal student loans and defaulted on those loans in December.

Barber said in her complaint that amid her financial challenges due to the pandemic, ED still garnished her wages to pay off her past-due federal student loans. She said ED seized more than $70 from her paycheck as recently as last week, according to the complaint.

“I am so worried about how I will get through this,” Barber said in a statement. “I have no money in the bank. I need every dollar I earn at work to survive each day, but my hours have been cut because of the virus. I don’t understand why the government keeps taking my money away after it passed a law that says they will stop.”

The suit was filed by Student Defense and the National Consumer Law Center, with the support of the Student Borrower Protection Center. The advocate groups argued the wage garnishment is in “clear violation of federal law” since the CARES Act prohibits such actions through September 30.

In March, DeVos said ED would stop seizing the wages and tax refunds of defaulted student loan borrowers for at least two months and retroactively applying the policy to March 13, 2020, the day President Donald Trump declared a national emergency in response to the pandemic. Congress went a step further in the CARES Act, extending it through the end of September.

However, the lawsuit contended that ED hasn’t done enough to stop the practice, pointing to an article published in The Washington Post last month that said ED had not sent formal letters to tell employers to stop withholding money from borrowers' paychecks on behalf of the government.

“Secretary DeVos promised last month that she had stopped federal wage garnishments altogether, which is what the CARES Act requires,” Alex Elson, senior counsel at Student Defense, said in a statement. “The truth is, she keeps on taking wages from the paychecks of Americans struggling to make ends meet. We sued today to make her stop.”

A spokesperson for ED declined to comment on the pending litigation, but said ED “has taken immediate action to notify employers to stop garnishing wages.”

“[ED]’s default loan servicer called employers by phone, sent emails when possible, and mailed letters to employers who could not be reached any other way,” an ED spokesperson said in a statement. “Payments we receive via garnished wages will be immediately processed for refund, and the employer will be contacted again to ensure the guidance to stop garnishing wages is understood. [ED] relies on employers to stop garnishing wages, but is taking every measure to contact employers and refund garnished wages to borrowers until Sept. 30, 2020.”

The lawsuit comes after dozens of Democratic lawmakers signed on to a letter urging ED and the Treasury Department to issue new guidance ensuring defaulted student loan borrowers no longer have their wages garnished during the ongoing pandemic. 

The letter alleged 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.

“Despite these statutory requirements, [ED] and its contracted private collection agencies, appear to be moving forward in blatant disregard to these new protections established by Congress,” the April 16 letter said.

In response to the letter, ED said it had already instructed the employers of more than 135,000 borrowers to stop garnishing wages and was reaching out to more.

Additionally, ED said at the time that if it receives funds from a garnishment between March 13 and September 30, it will refund those garnished wages.

"We will continue to do everything in our power to stop Betsy DeVos from further driving struggling borrowers into despair,” Student Borrower Protection Center Executive Director Seth Frotman said in a statement. “This lawsuit shines light on how she has been operating a student debt collection machine that is accountable to no one — and it must be stopped."

 

Publication Date: 5/4/2020


David S | 5/4/2020 3:32:53 PM

The country with the by far most expensive higher education system should not have a punishment-based student loan repayment system. The law is clear. Follow it. Don't refund garnished wages...don't garnish them in the first place.

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