Federal student loan borrowers late on their payments have been granted some relief by the Department of Education, which won’t garnish their wages or withhold money from their federal benefits or tax refunds for at least 60 days starting March 13 to alleviate the financial stress caused by the coronavirus pandemic.
The move will provide relief to nine million borrowers in default on their student loans, some of whom may face salary cuts or layoffs due to the economic crisis caused by coronavirus stoppages.
The Education Department has stopped all requests to the U.S. Treasury to withhold defaulters’ federal benefits and garnish their wages. These withholdings, known as “Treasury offsets,” are permitted by federal law and are typically applied toward repayment of defaulted federal student loans.
U.S. Secretary of Education Betsy DeVos also directed the department to refund approximately $1.8 billion in offsets to more than 830,000 borrowers. The refunds represent offsets that were in the process of being withheld on March 13, the date President Trump declared a national emergency and announced emergency executive actions related to COVID-19, the disease caused by the coronavirus. DeVos said the number of borrowers who ultimately benefit could be higher than 830,000 because many offsets are currently in progress.
“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,” said DeVos in a press statement. “Americans counting on their tax refund or Social Security check to make ends meet during this national emergency should receive those funds, and our actions today will make sure they do.”
These new actions complement earlier instituted measures of relief for federal student loan borrowers, kicked off by the Trump administration’s March 13 announcement freezing interest on federal student loans.
A week later on March 20, the education department said federal student loan borrowers will have the option to suspend their loan payments for two months. At the time, DeVos said that during the health emergency, “everyone should be focused on staying safe and healthy, not worrying about their student loan balance growing.”
