The federal stimulus plan, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act, automatically suspends most federal student loan payments until September 30, 2020. The Act also ensures that your credit won’t take a hit as a result of the suspension, as well as prohibits collection actions, wage garnishments, and Treasury offsets for defaulted federal student loans through September 30, 2020.
According to a lawsuit filed on April 30, 2020, however, Secretary of Education Betsy DeVos and the U.S. Department of Education are still garnishing the wages of federal student loan borrowers who are behind on payments.
The Education Department has the authority to garnish the wages of individuals who default on federal student loans without getting a court order first. But the CARES Act, as noted above, which President Trump signed into law on March 27, 2020, disallows wage garnishments for defaulted federal student loans through September 30, 2020.
Previously, on March 25, 2020, DeVos had announced that the Department of Education would halt collections, including wage garnishments and tax refund offsets, for at least 60 days, retroactive to March 13, 2020, when President Trump declared a national emergency. She also said the Department of Education would return $1.8 billion to more than 830,000 borrowers that it collected since March 13. (A timeline for when refunds will occur still hasn’t been provided.)
Following the CARES Act prohibition on garnishments, the Department of Education announced that it had indeed stopped wage garnishments for defaulted loans and sent a notice to student loan borrowers that it had done the same. Despite these declarations, the Education Department continued to seize wages from distressed federal student loan borrowers. So, the National Student Legal Defense Network filed a lawsuit in the U.S. District Court for the District of Columbia, on behalf of Elizabeth Barber and others.
The lawsuit states that Ms. Barber, a 59-year-old home health aide who earns $12.89 per hour, but whose hours were reduced because of the pandemic, struggles to afford daily necessities while also paying off her federal student loan debt. The suit also says that the CARES Act’s reprieve from wage garnishment was supposed to help Ms. Barber get by, but the Department seized her wages as recently as April 24—nearly a full month after President Trump signed the CARES Act into law.
Along with Ms. Barber, approximately 285,000 people had their wages garnished between March 13 and March 26, 2020, in violation of the CARES Act.
The Department of Education claims that it has taken immediate action to notify employers to stop garnishing wages. It says that its default loan servicer has called employers by phone, sent emails when possible, and mailed letters to employers who could not be reached any other way.
But if your wages—or tax refund, Social Security, or disability payment—is being garnished, contact the Education Department’s Default Resolution Group at 800-621-3115 (TTY 877-825-9923). And, because the Department relies on employers to stop garnishing wages, if your employer is continuing to garnish your wages despite the CARES Act, you should also contact the human resources department where you work.
If pay was taken out of your paycheck after March 13 because of a defaulted federal student loan debt, you’re entitled to a refund of the amount garnished.
Effective date: April 30, 2020