May 12, 2020

Yes, We Are Still Garnishing Wages From 54,000 Student Loan Borrowers

Yes, We Are Still Garnishing Wages From 54,000 Student Loan Borrowers


The Education Department was supposed to stop garnishing wages from borrowers to pay their student loan debt. A new lawsuit says they didn’t.

Here’s what you need to know.

Student Loans

Federal student loan debt collection was supposed to halt effective March 13, 2020. Why? The CARES Act – the $2.2 trillion financial stimulus package in the wake of the Coronavirus pandemic – instituted several protections for federal student loan borrowers from March 13, 2020 through September 30, 2020. Among other benefits, this includes suspension of federal student loan payments, interest rates on federal student loans set to 0%, and no federal student loan debt collection on defaulted student loans.

A federal class action lawsuit filed in April in Washington, D.C. alleges that despite the prohibition set by the CARES Act, U.S. Secretary of Education Betsy DeVos is illegally seizing paychecks from federal student loan borrowers during the Coronavirus pandemic. The lead plaintiff is Elizabeth Barber, who, according to her complaint, had her work hours reduced, has no money in her bank account, unpaid local taxes, a lien on her home, and is past due on student loans as well as water and electric bills. Despite these financial challenges, Barber says that the Education Department garnished her wages (an apparent violation of the CARES Act) to pay her past-due federal student loans. The Education Department told the court that as of March 13, about 390,000 student loan borrowers were subject to wage garnishment for past due student loan payments. Approximately 14%, or 54,000, are still (nearly two months later) having their wages garnished from their paychecks.


Why are wages still being garnished?

Wage garnishment – which automatically removes money from your paycheck to pay past-due debts such as student loans – is done by your employer, not the Education Department. The Education Department says it has notified employers to comply with the CARES Act and to stop garnishing their employees’ wages as of March 13. Apparently, not all employers – for one reason or another – are in compliance. According to The Washington Post, the Education Department said it has proactively mailed letters to 83,500 borrowers (more than the approximately 54,000 borrowers reportedly impacted by wage garnishment) who are in student loan default. The Education Department also says it is contacting 4,400 borrowers who did not update their correct address information.


Can you get a refund if your wages were garnished?

Yes, it’s possible to receive a full refund if your wages were illegally seized through wage garnishment, a tax refund or Social Security benefits, for example. It depends when your wages were garnished:

  • Before March 13, 2020: no refund
  • After March 13, 2020: refund

This is because March 13 is the effective date of the CARES Act, and the day that wage garnishment to pay student loans in default was halted. If your wages or other benefits were illegally garnished, contact the Education Department’s Default Resolution Group to obtain a refund at 1-800-621-3115 (TTY for the deaf or hearing-impaired 1-877-825-9923). When exactly will you get a refund? Unfortunately, there is no specific timetable. Senator Cory Booker (D-NJ) and Rep. Ayanna Pressley (D-MA) and 40 members of Congress sent a letter to DeVos demanding that the Education Department stop any ongoing illegal garnishment of wages to collect federal student loan debt and to provide a clear timeline for when borrowers who have been impacted can receive a full refund.

Can the government garnish your wages to pay student loans?

Except during the period protected by the CARES Act, the answer is yes. The federal government can lawfully withhold up to 15% of your paycheck to collect on past-due federal student loan debt. The latest student loan debt statistics show that in 2018, for example, the U.S. Department of Education legally garnished $840 million through wage garnishment.

Helpful Resources: Student Loans

Here’s everything that’s happened to your student loans in 2 weeks

How to pay your student loans during Coronavirus

How to get financial relief for your student loans during Coronavirus

How to get relief for your private student loans

Should you pay off student loans during COVID-19?

How to apply for unemployment

These companies are hiring despite Coronavirus

What you need to know about paid sick leave during Coronavirus

Do you qualify for paid sick leave?

How to contact your student loan servicer

5 ways to lower your student loan payments during Coronavirus

Student loan refinancing rates are incredibly cheap



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