Education Dept. Will Stop Collections On Student Borrowers In Default

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Borrowers who have defaulted on their federal student loans will get a temporary reprieve from having their wages, Social Security benefits and tax refunds garnished by the federal government, U.S. Education Secretary Betsy DeVos announced on Wednesday. This break will last for a minimum of 60 days, beginning March 13.

DeVos also announced the Department of Education would refund about $1.8 billion to the more than 830,000 borrowers who were in the process of having money withheld.

The department said it has asked private collection agencies to stop debt collection activities, including phone calls and mailers. In a release, the agency said it would rely on employers to ensure wages are not garnished, and it advised borrowers to "contact their employers' human resources department" if there are problems.

This comes after earlier guidance to help borrowers who are struggling with the economic ramifications of the spreading coronavirus. In that guidance, issued March 20, the department authorized an automatic suspension of payments for any borrower more than 31 days delinquent as of March 13, or who becomes more than 31 days delinquent, essentially giving borrowers a safety net during the national emergency. The department also announced that people with federal student loans will automatically have their interest rates set to 0% for at least the next 60 days.

Borrowers will also have the option to suspend payments entirely for at least two months without accruing interest, but they must request these terms — officially called forbearance — by reaching out to their loan servicers either online or on the phone. This may become a challenge, as many servicers have been disrupted by the pandemic.