On April 30, 2020, Student Defense and the National Consumer Law Center (NCLC), with the support of the Student Borrower Protection Center (SBPC), filed a class action lawsuit against the U.S. Department of Education (“Department”) and then-Secretary Betsy DeVos, demanding an immediate halt to the Department’s garnishment of student borrowers’ wages, which the Coronavirus Aid, Relief, and Economic Security (CARES) Act had prohibited since March 27, 2020. Following this lawsuit, the Department stopped seizing the wages of over 50,000 student loan borrowers and provided over $186 million in refunds of illegally seized wages to over 380,000 borrowers. Yet tens of thousands of borrowers remain without refunds, and an unknown number are still subject to unlawful wage garnishment, now at the hands of the Biden administration.
The CARES Act expired on September 30, 2020 and now the prohibition against wage garnishment to collect student loans is found just in an Executive Order. As a result, the lawsuit, Barber v. DeVos, officially came to an end last week. But the fight to protect student loan borrowers subject to the Department’s cruel administrative wage garnishment practices continues.
The lawsuit exposed serious flaws inherent in the Department’s current wage garnishment system, adding to the growing body of evidence that shows this system to be unwieldy and out of control. Under no circumstances should the Secretary of Education subject borrowers with defaulted debts to a system that has shown time and time again that cannot comply with the law.
First, the time it took the Department to effectively shut down the administrative wage garnishment system raises serious due process concerns. Over 50,000 borrowers were subject to unlawful garnishment a month after Congress prohibited it, and some are still subject to garnishment nine months later despite an administrative extension of the payment suspension. Plainly, the system lacks adequate safeguards to ensure that workers’ wages are not illegally taken by the government.
Safeguards are particularly important since federal law gives the Department the extraordinary authority to garnish student borrowers’ wages without a court order. Even in normal times, garnishment can drive a wage earning family to the wall, and it poses a particular threat to the financial stability of Black and Latinx families.
Second, this litigation made clear that the Department relies on employers to run its collection system and wrongly abdicates responsibility for the inevitable fallout. As the Chief Operating Officer of Federal Student Aid explained, “[t]he process of applying the garnishment order to the employee’s wages is wholly dependent on the employer implementing the notice of cancellation.” The recognition that protecting borrowers from unlawful garnishment by the federal government depends entirely on thousands of private employers of varying sizes and sophistication effectively receiving, understanding, and promptly implementing government notices makes even more troubling the Department’s failure to have systems in place to promptly solve and compensate borrowers for foreseeable errors.
Instead of solving the problem, the Department’s response to continued wrongful wage garnishment by employers was simply to stop receiving the garnished wages mailed to it and to leave resolution in the hands of those same confused employers. As of October 30, 2020, the Department shut down the post office box where it had been receiving administrative wage garnishment payments. The payments are thus being automatically returned to the employers by the U.S. Postal Service without any involvement by the Department. As a result, the Department no longer even receives any information about the number or identity of the borrowers whose wages are being unlawfully garnished or of the employers still garnishing. This means that an unknown number of borrowers are still having money taken from their paychecks. Whether this money ultimately gets returned to employees is up to the same employers that, thus far, have failed to stop seizing the wages in the first place.
Third, the lawsuit revealed the abysmal state of the Department’s recordkeeping. As of January 8, 2021, there were approximately 23,250 borrowers who had not received refunds of illegally garnished wages because the Department did not have valid addresses on file for them. The Department obviously had enough contact information about these borrowers to garnish their wages, yet it is not only unable to send them refunds but is probably failing to give them critical information about their loans and about their rights, likely contributing to the failure of the various programs in place meant to provide relief to struggling borrowers and prevent default.
The broken system that allowed illegal wage garnishments to continue for tens of thousands of borrowers was not created by the last administration, but it can and should be permanently ended by the new administration.
The Department’s inability to control its own debt collection machine is unacceptable. Legislation introduced by Senators Cory Booker and Elizabeth Warren in 2020 would hold the Department of Education accountable for past debt collection abuses and ensure that the government does not drive borrowers in default into poverty. While change is badly needed, there is nothing stopping the Department from implementing many of these critical structural reforms through administrative action. The tens of thousands of borrowers who are still waiting for refunds,* and the unknown number who are still seeing their paychecks reduced, deserve quick, decisive action.
*Borrowers who have not received refunds should call the Department of Education’s Default Resolution Group to update their information and request a refund.