There are several steps involved in ending involuntary collection. Chief among them is notifying an employer to stop withholding money from the borrower’s paycheck. It can take employers a couple of weeks to fully process and cease collection, making it critical to get the notices out as fast as possible.
People familiar with the matter, who spoke on the condition of anonymity because they were not authorized to speak publicly, said the department sent emails to employers, most of which remained unopened, but failed to send formal letters. As a result, borrowers are still having their paychecks garnished.
When all of the pieces are in place, it can take about three weeks to end involuntary collection because of the antiquated manual system the department uses, according to compliance reports from the department. Any missteps along the way can add days, if not weeks, to the process.
The Education Department said it has been trying to speed things up by first calling and emailing employers, who most likely are not physically in their offices to receive mail. Even if the agency gets ahold of someone, lifting the garnishment could still be stymied by an employer who fails to act.
The department estimates about 285,000 people were having their wages garnished between March 13 and March 26, the latest available data.
Democratic leaders and consumer groups have questioned the agency’s handling of the involuntary collection order, which Congress codified in the stimulus package and extended through Sept. 30.
“We have built a student loan debt collection monster that we cannot physically stop, even in violation of the law,” said Seth Frotman, executive director of the Student Borrower Protection Center, an advocacy group.
The center has received dozens of complaints in recent weeks from borrowers who are still being shorted on their paychecks.
A group of 42 congressional Democrats, led by Rep. Ayanna Pressley (D-Mass.) and Sen. Cory Booker (D-N.J.), sent DeVos and Treasury Secretary Steven Mnuchin a letter last week seeking answers on why wage garnishment continues.
The group criticized the department for an online FAQ that tells borrowers their wages could still be garnished despite the suspension and that the money would be refunded later. The lawmakers argue the guidance conflicts with the Education Department’s order and ignores the statutory requirement to suspend involuntary collections in the Cares Act.
“We have already heard from borrowers and consumer advocates that employers and private collection agencies are failing to promptly implement the suspension of involuntary collections,” the lawmakers wrote. “This is simply unconscionable. This Administration’s actions and disregard for these new protections under federal law will place workers and families in further economic jeopardy.”
There are more than 9 million Americans who have not made a payment on their federal student loans in nearly a year — defaults that would typically place them at risk of having a portion of their paycheck, Social Security or disability income garnished by the federal government.