Posted 3 years ago - by

Federal Student Aid to Stop Wage Garnishments and Collections Actions for Student Loan Borrowers

The COVID-19 pandemic has prompted U.S. Secretary of Education Betsy DeVos to order the Federal Student Aid (FSA) office of the Department of Education to halt collection actions and wage garnishments as a form of additional financial assistance to borrowers. The latitude will extend over a 60-day period beginning March 13, 2020.


Latitude during difficult times

“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,” said Secretary DeVos, adding that Americans who are dependent on their tax refund or Social Security check to make ends meet during the COVID-19 national emergency should receive these critical funds. She emphasizes that the move made by the Education Department will ensure these tax refunds and Social Security checks are available to Americans who need them.

To achieve its goal, the ED has ceased all requests to the U.S. Treasury to withhold funds from federal income tax refunds, Social Security payments, and other federal payments due to defaulted borrowers. Known as “Treasury offsets,” the withholdings are permitted by federal law and applied toward repayment of defaulted federal student loans.

Secretary DeVos has also directed the ED to refund roughly $1.8 billion in offsets to more than 830,000 borrowers. The ED expects a spike in the number of borrowers who will benefit from this relief as servicers work through additional offsets on queue at the time of DeVos’s announcement.

The refunds constitute offsets that were in the process of being withheld on March 13, 2020, when President Donald J. Trump declared a national emergency and announced COVID-19-related emergency executive actions.

In addition, private collection agencies have been asked to halt all proactive collection activities, including calls to borrowers and issuance of collection letters and billing statements.

The ED will track employers’ compliance with DeVos’s order by monitoring adjustments to borrowers’ paychecks. Borrowers should contact their employers’ human resources department if their wages are still garnished after March 13.

Borrowers should contact the Education Department’s Default Resolution Group if they have:

  • Defaulted student loans
  • A current relationship with a private collection agency
  • An interest in continuing a prior payment arrangement, consolidating their loans, or beginning a loan rehabilitation arrangement with their private collection agency

Default Resolution Group:  1-800-621-3115
TTY for the hearing-impaired: 1-877-825-9923

Private collection agencies can provide assistance upon request by the borrower.

This new student loan relief for borrowers comes on the heels of the presidential announcement stating 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.

Additionally, non-defaulted borrowers can suspend their payments for at least 2 months, which gives them greater flexibility during the national emergency. This means borrowers can temporarily stop their payments without fear of accruing interest.

Helpful links

For more information:
StudentAid.gov/coronavirus

For a list of private collection agencies contracted by the Department: StudentAid.gov/manage-loans/default/collections#contact-collection-agency

Contact Payroll Systems for any related payroll solutions you require.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.