- A new Student Borrower Protection Center report found illegal wage garnishment for student-loan borrowers during the pandemic.
- Elizabeth Warren said it showed how the government “failed to protect some of the most vulnerable” borrowers.
- The seizure of benefits continued even after Congress prohibited the practice during the pandemic, the report said.
A new report revealed student-loan borrowers weren’t entirely protected from debt collection practices during the pandemic — and it has Massachusetts Sen. Elizabeth Warren concerned.
On Thursday, the Student Borrower Protection Center released a report that found, via a Freedom of Information Act (FOIA) request submitted by advocacy group Student Defense, that the Education Department continued to garnish student-loan borrowers’ wages after Congress required the department to cease those collection tactics when the pandemic began in March 2020.
Specifically, while the department’s Inspector General reported in June 2021 that borrowers were still having their wages garnished as late as October 23, 2020, the report found the garnishments actually continued at least through August 2021, with “hundreds of borrowers having tens of thousands of dollars illegally removed from their paychecks in the intervening months.”
“This alarming report reveals our government failed to protect some of the most vulnerable student loan borrowers from illegal wage garnishments during the COVID-19 pandemic,” Warren said in a statement. “The U.S. Department of Education must halt these harmful debt collection practices once and for all and ensure compliance with the law.”
Wage garnishment happens when student-loan borrowers falls behind on payments by more than 27o days, considered to be in default. That leaves them subject to not only wage garnishment, but seizure of other federal benefits like the Child Tax Credit and Social Security.
As part of the pause on federal student-loan payments first implemented through the CARES Act in March 2020, borrowers in default would be protected from debt collection during that time period. But despite the law, the report said the Education Department and its contractor, Maximus, didn’t have a clear way of stopping seizure of benefits.
While the Inspector General noted in June 2021 that the Education Department had refunded most wage garnishments that had been improperly taken during the pandemic, consumer complaints within the FOIA documents found the refunds did not remedy the financial harm the impacted borrowers suffered.
“They keep calling my job and are still trying to garnish my check,” one of the borrower complaints said. “I can barely feed my family and we are about to be homeless. Please make it stop!”
When those borrowers tried calling their student-loan servicer for assistance, they had trouble actually getting in contact with a representative and experienced weeks of delay, the report said — something many federal borrowers have experienced over the past years.
The Education Department has not commented publicly on this report, but is has announced steps to help borrowers in default. It revealed a “Fresh Start” plan to help defaulted borrowers to return to good standing once repayment resumes, which is now scheduled for June 30, or whenever the lawsuits seeking to block President Joe Biden’s broad student-debt relief plan are resolved — whichever comes first.
Under Secretary of Education James Kvaal also acknowledged in August that “borrowers who default on their loans are people who have been failed by the policies and lagging investments in college affordability. They provide the most compelling evidence that the student loan system needs fundamental change.”
But until that change is fully implemented, advocates argue debt collection practices should not resume.
“In the face of a pandemic that resulted in economic chaos for millions of families, borrowers were trapped in a garnishment system that is fundamentally incapable of operating within the law—and a federal government unwilling and unable to hold it accountable for breakdowns,” Persis Yu, deputy executive director and managing counsel at the Student Borrower Protection Center, said in a statement. “If ED can’t guarantee that its debt collection tool can comply with consumer protections, it should never turn this machinery on again.”