Education Department targets employers over wage garnishment

The U.S. Education Department says it’s ramping up efforts to contact more than 37,000 employers who have improperly continued to garnish wages from workers who have fallen behind on their student loans.

Congress ordered a temporary pause on involuntary collections in March, but the Education Department was sued weeks later in a class action case alleging that the agency failed to notify employers of the change. A court filing Monday revealed that the department was still garnishing wages from about 54,000 workers as of May 7, and 390,000 were getting wages taken as of March 13.

In a statement, the department says it has notified employers to stop garnishing wages from defaulted student loan borrowers, but some have failed to comply. The agency said it sent letters to nearly 37,500 employers on Monday ordering them to stop, and staffers are also calling employers to make sure they received the notice.

The department also sent letters to 83,500 defaulted borrowers over the weekend saying their wages should not be garnished and explaining how they can contact their employers to halt the practice.

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. Last year, the department garnished $842 million from workers, according to federal data.

Congress told the Education Department to halt garnishments through Sept. 30 as part of a coronavirus rescue package that was signed March 27. Education Secretary Betsy DeVos had already called for the measure days earlier and said borrowers would be getting refunds for any wages taken since March 13.

But a class action lawsuit filed April 30 alleged that thousands of workers were still getting up to 15% of their paychecks held back because the department had failed to notify employers that they must stop withholding pay.

The complaint was filed by consumer and student advocacy groups on behalf of Elizabeth Barber, a New York home health aide, and any other borrowers still facing garnishments. Barber says she makes $13 an hour and has had 12% of her pay held back recently.

One of the groups behind the suit, Student Defense, said Monday’s court filing proves that thousands of workers are still being harmed by the department six weeks after Congress’ rescue package took effect.

“For borrowers already worried about affording rent, groceries and medication, losing part of each paycheck to an unlawful garnishment is enough to push them into truly dire circumstances,” said Alex Elson, senior counsel at Student Defense.