Trump Administration Stops Collection Activity on Defaulted Federal Student Loans
The Trump Administration has stopped
all collection activity on defaulted federal student loans until
further notice. Private collection agencies have also been instructed to halt
their collection activities, including calling borrowers and issuing collection
letters and billing statements. The U.S. Department of Treasury has been ordered
to cease garnishment of tax refunds until further notice for those who have defaulted on their federal student loans.
Additionally, the U.S. Department of Education (ED) will refund approximately $1.8
billion in collection payments to more than 830,000 borrowers. The refunds represent
collection payments that were in the process of being withheld on March 13, 2020,
the date President Trump declared a national emergency and announced emergency
executive actions related to COVID-19
ED must rely on employers to make the change to borrowers’ paychecks, so it will
monitor employers’ compliance with the request to stop wage garnishment. Borrowers
whose wages continue to be garnished after March 13 should contact their employers’ human resources departments.
Finally, the Coronavirus Aid, Relief, and Economic Security
(CARES) Act, the third coronavirus stimulus bill, was signed into law on March
27. This new law grants a six-month student loan payment deferment. It is not
currently clear whether this deferment will be automatic or borrowers will have
to apply for it. ED is working on implementation guidance.