Wage Garnishment for Student Loans during COVID-19 Crisis

February 01, 2021 • April Mabry

Wage Garnishment for Student Loans during COVID-19 Crisis

Editor's note: This article has been updated to reflect the extension of the student loan forbearance period through December 31, 2022.

Department of Education (ED) has suspended garnishment on federally held student loans through December 31, 2022, in response to the Coronavirus pandemic. Interest on these loans is also suspended during this time.

ED announced that due to the COVID-19 national emergency, the Department will halt collection actions and wage garnishments. ED will send human resources departments letters instructing them to stop wage garnishment. If ED receives funds from a garnishment between March 13, 2020 and December 31, 2022, they will refund the wages to the individual.

This only includes loans owned by the U.S. Department of Education (ED), including Direct Loans, as well as Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by ED. Loans owned by commercial lenders or held by the institution a student attended are not eligible for this benefit at this time.

Suspension of interest

On March 13, 2020, the president announced that interest would be waived on federally held student loans for a period of 60 days. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides further flexibility by allowing most holders of student loans to suspend monthly payments through December 31, 2022, without any interest accruing.

It is not advisable for employers to automatically stop payments without notice from the employee or the lender. Districts may not know who the loan holder is and whether they’re included in the ED garnishment suspension. While garnishments will be stopped during this period, employees making loan payments on their own may want to continue payments because 100 percent of the payment is applied to the principal while the interest is waived.

Employee communications

Districts may want to reach out to employees with student loans to provide them with the link to the ED guidance and advise them to contact their lender or the district to arrange for payments to stop because of the suspension of interest.

April Mabry is an assistant director at TASB HR Services. Send April an email at april.mabry@tasb.org.

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Tagged: Compensation, COVID-19, "Epidemic Response"