Student Loans Were Supposed To Be Paused, But $40 Million Of Student Loan Debt Was Garnished AnywaySeptember 8, 2021
Student loan payments were supposed to be paused during the Covid-19 pandemic, but $40 million of student loan debt was garnished anyway.
Here’s what you need to know.
In a nightmare scenario for some student loan borrowers, their wages were taken to pay their student loans — even when this wasn’t allowed to happen. Student Borrower Protection Center, a leading student loans advocacy non-profit, discovered through a Freedom of Information Act (FOIA) request that approximately $40 million in wages were garnished from student loan borrowers, even though the U.S. Department of Education prohibited garnishment of wages to pay student loans during the Covid-19 pandemic. Imagine for a moment that you’re a student loan borrower. In response to the Covid-19 pandemic, Congress passed the Cares Act — the $2.2 trillion stimulus package — in March 2020 and halted all mandatory federal student loan payments, set interest rates on federal student loans to 0%, and stopped all collection of student loans in default. However, somehow, your wages were improperly garnished to pay your student loans. Here’s what happened.
Student loans: what happened
Based on data provided by Federal Student Aid, the Student Borrower Protection Center alleges that guarantee agencies that manage the Federal Family Education Loan Program (FFELP) — which are privately-owned student loans issued prior to 2010 by banks and financial institutions and were guaranteed by the federal government — did not comply with orders from the U.S. Department of Education to stop garnishing wages from student loan borrowers who defaulted on their student loans. This includes:
- One guarantee agency, Ascendium, continued to collect $3.9 million in wages from defaulted FFELP student loan borrowers in June 2021;
- Guarantee agencies failed to refund $12.9 million in cumulative wages garnished since October 2020, but as of June 2021 still had not refunded these improper wage garnishments, despite orders from the Education Department to do so;
- an additional $24.8 million in wages were garnished from defaulted FFELP student loan borrowers from March 2020 to October 2020;
In aggregate, the Student Borrower Protection Center says that, as of June 2021, $37 million in improper wage garnishments have not been refunded to student loan borrowers — even though these guarantee agencies were required by the Education Department to refund these wages. “The results of our FOIA request make clear that despite [the U.S. Department of Education’s] orders, the most vulnerable student loan borrowers continued to have money taken out of their paychecks during an ongoing pandemic,” the Student Loan Protection Center wrote.
Student loan relief: what happens next
Student loan relief, which includes this temporary student loan forbearance and…