The U.S. Education Department has continued to garnish wages from workers who are behind on their student loan payments even after Congress ordered the agency to suspend the practice during the coronavirus pandemic, a new lawsuit charges.
The complaint, filed Thursday in federal court in Washington, alleges that thousands of workers are getting up to 15% of their paychecks held back because the Education Department has failed to notify employers that they must stop withholding pay. It was filed by consumer and student advocacy groups on behalf of Elizabeth Barber, a home health aide in New York, and any others who have lost wages during the crisis.
Barber, 59, said the department has docked her pay multiple times since Congress approved its March 27 rescue package calling for immediate suspension of involuntary collections. Barber makes less than $13 per hour, and has had 12% of her pay taken recently. She's had to leave bills unpaid to cover basic needs, she said, and she's at risk of losing her home if she doesn't catch up on taxes.
"I'm living paycheck to paycheck. By the end of the week, I may not even have enough for groceries," said Barber, of Penfield, New York. “Some of us are going to fall through the cracks. Where are we going to get help from?”
The department declined to comment on the lawsuit but said it has taken immediate action to halt garnishments. It says employers have been contacted by phone, email and letters instructing them to stop docking pay.
“Payments we receive via garnished wages will be immediately processed for refund, and the employer will be contacted again to ensure the guidance to stop garnishing wages is understood,” spokeswoman Angela Morabito said in a statement.
Education Secretary Betsy DeVos previously told federal student loan borrowers that garnishments would be halted through Sept. 30, with no action needed on their part. She was applauded by advocates for announcing the change even before Congress required it. On March 25, DeVos said collections were being paused and workers would be refunded $1.8 billion that had been taken since March 13.
“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 in announcing the change.
But the suit says DeVos has failed to deliver on her promise. “The department still has not ensured that all affected employers have received instructions to stop garnishing the pay of their employees with defaulted federal student loans,” according to the complaint. It alleges that the department attempted to send emails to employers, but that most were never opened.
Federal law authorizes the Education Department to garnish up to 15% of workers’ paychecks without a court order if they go into default on federal student loan payments. The agency can issue garnishment orders to employers and contracts with private agencies to enforce collection. Last year, the department garnished $842 million from workers, according to federal data.
On April 1, the department issued new guidance for borrowers whose pay was still getting docked. It said their employers' human resource departments would be getting letters instructing them to stop, and it promised refunds for the garnishments. But advocacy groups say wages are still being withheld, and borrowers are still waiting on refunds.
“Refunds down the road don’t really cut it here,” said Alex Elson, senior counsel at Student Defense, one of the advocacy groups that filed the suit. “To comply with the law and to satisfy its entire purpose, the relief needs to be immediate.”
A group of 42 Democrats in Congress raised concern over the issue in an April 16 letter to DeVos and Treasury Secretary Steve Mnuchin. The letter, led by Rep. Ayanna Pressley of Massachusetts and Sen. Cory Booker of New Jersey, said borrowers and advocates were reporting that employers and private collection agencies had failed to implement the suspension weeks after it had been ordered.
“This is simply unconscionable,” the Democrats wrote. “This administration’s actions and disregard for these new protections under federal law will place workers and families in further economic jeopardy.”
The lawsuits asks the court to order that DeVos halt wage garnishment immediately and notify borrowers when it has actually been stopped. It also demands immediate refunds for any pay that has been withheld since March 13, the day President Donald Trump declared a national emergency.
“With the president at her side, Secretary DeVos promised in March that she had stopped federal wage garnishments altogether,” Elson said. “The truth is, she keeps on taking wages from the paychecks of Americans struggling to make ends meet. We are suing to make her stop.”
The suit was also filed by the National Consumer Law Center.
The complaint says Barber's pay has been withheld as recently as April 24. She went into default on her student loans in 2019 and owes about $10,000. She borrowed the money to attend Nazareth College in 2010, where she studied psychology.