U.S. Department of Education Secretary Betsy DeVos announced Wednesday that she has directed the Office of Federal Student Aid to stop wage garnishment and collections actions for student loan borrowers. The office will also refund more than $1.8 billion to students and families, Devos said in a news release, which said the action will last at least until May 12.
“These are difficult times for many Americans, and we don’t want to do anything that will make it harder for them to make ends meet or create additional stress,” DeVos said. “Americans counting on their tax refund or Social Security check to make ends meet during this national emergency should receive those funds, and our actions today will make sure they do.”
The department has stopped all requests to the U.S. Treasury to withhold money from defaulted borrowers’ federal income tax refunds, Social Security payments, and other federal payments, the release said. “Treasury offsets,” which these withholdings are known as, are permitted by federal law and applied toward repayment of defaulted federal student loans. DeVos directed the Department to refund about $1.8 billion in offsets to more than 830,000 borrowers. The release said the department expects the number of borrowers who will benefit from this relief to increase as servicers work through additional offsets in the queue at the time of the announcement.
The release said refunds represent offsets that were in the process of being withheld on March 13, the date President Donald J. Trump declared a national emergency and announced emergency executive actions related to COVID-19.
Additionally, private collection agencies have been instructed to halt all proactive collection activities, including making phone calls to borrowers and issuing collection letters and billing statements, the release said.
The department must rely on employers to make the change to borrowers’ paychecks, so it will monitor employers’ compliance with the request to stop wage garnishment, the release said. Borrowers whose wages continue to be garnished after March 13 should contact their employers’ human resources department.
The release said borrowers with defaulted student loans, a current relationship with a private collection agency, and an interest in continuing a prior payment arrangement, consolidating their loans, or beginning a loan rehabilitation arrangement with their private collection agency, should contact the Department’s Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hearing-impaired 1-877-825-9923). Private collection agencies are permitted to provide assistance upon the borrower’s request.
The new student loan relief for borrowers comes just days after Trump announced that borrowers with a federally held student loan will automatically have their interest rates set to 0% for a period of at least 60 days. The release said these non-defaulted borrowers will have the option to suspend their payments for at least two months to allow them greater flexibility during the national emergency. This will allow borrowers to temporarily stop their payments without worrying about accruing interest.
Visit StudentAid.gov/coronavirus for more information.