Trump admin. stops collection of defaulted federal student loans
"The Trump administration will stop seizing wages, tax refunds, and Social Security benefits of Americans who have defaulted on their federal student loans as the new coronavirus or COVID-19 outbreak continues.
“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,” Education Secretary DeVos said in a statement. “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 today announced that it will halt requests to the U.S. Treasury to withhold tax refunds, Social Security and other payments, to federal student loan borrowers who had defaulted. In other words, people will no longer have their tax refunds et. al seized, if they owe money on their federal student loans.
For those who already had those federal payments or tax refunds seized (but not the wage garnishments), DeVos authorized her department to refund approximately $1.8 billion to more than 830,000 borrowers.
“The Department expects the number of borrowers who will benefit from this relief to increase,” the press release added, as loan servicers work through to implement these actions.
The agency intends to make this policy retroactive to March 13 (or in other words, since March 13), which is the day President Donald Trump declared a national emergency.
Furthermore, borrowers will face additional protections against debt collectors: DeVos instructed the private collection firms that it employs to collect on default student loans to “halt all proactive collection activities, including making phone calls to borrowers and issuing collection letters and billing statements.”
This is huge! @usedgov is putting a stop to collecting on defaulted federal #studentloans amid the #coronavirus pandemic and ordering private collection firms to stop pursuing borrowers “until further notice." Thank you @BetsyDeVosED for listening! https://www.politico.com/news/2020/03/24/exclusive-devos-halts-collection-of-defaulted-federal-student-loans-146929 …
"Department officials have ordered the private companies it hires to collect defaulted loans to immediately stop calling borrowers, sending collection notices or taking steps to seize portions of their paychecks, according to a memo viewed by POLITICO.
“Private Collection Agencies shall cease all Administrative Wage Garnishment efforts,” a department official wrote in the message to the industry last week. The department’s restrictions, which still permit the collection companies to accept incoming calls from borrowers, are to remain in place “until further notice,” the message said.
The Education Department also plans to stop referring defaulted student loan accounts to the Treasury Department, which is responsible for executing the seizure of borrowers’ tax refunds and other federal benefits like Social Security payments."