Sued for seizing student wages....

DeVos sued for seizing student loan borrowers' wages during pandemic

The lawsuit claims that the Education Department hasn’t actually halted the practice and is continuing to garnish wages in violation of the CARES Act.

By MICHAEL STRATFORD

Education Secretary Betsy DeVos is continuing to garnish the wages of federal student loan borrowers who fall behind on payments even though Congress suspended the practice in the economic rescue package, according to a new lawsuit.

An upstate New York woman who works as a home health aide for less than $13 an hour claimed in the lawsuit, filed late Thursday, that the federal government seized more than $70 from her paycheck as recently as last week — nearly a full month after President Donald Trump signed the CARES Act into law. She is suing on behalf of about 285,000 borrowers whose wages are being garnished, according to the lawsuit.

DeVos first announced in March that she would take administrative action to automatically stop the Education Department from seizing the wages —and tax refunds — of defaulted student loan borrowers for at least two months. Congress then included that policy in the CARES Act and extended it, prohibiting the Education Department from garnishing wages or tax refunds through Sept. 30.

But the proposed class action lawsuit claims that the Education Department hasn’t actually halted the practice and is continuing to garnish wages in violation of the CARES Act. It cites a Washington Post story that said the department had not sent formal letters to tell employers to stop withholding money from borrowers' paychecks on behalf of the government.

The department estimated some 285,000 people had their wages garnished between March 13 and March 26, according to The Post.

Education Department spokesperson Angela Morabito declined to comment directly on the pending litigation but said the department "has taken immediate action to notify employers to stop garnishing wages."

"The Department’s default loan servicer called employers by phone, sent emails when possible, and mailed letters to employers who could not be reached any other way," Morabito said in a statement. "Payments we receive via garnished wages will be immediately processed for refund, and the employer will be contacted again to ensure the guidance to stop garnishing wages is understood. The Department relies on employers to stop garnishing wages, but is taking every measure to contact employers and refund garnished wages to borrowers until Sept. 30, 2020."

Department officials have previously said they plan to refund all wages seized by the government since March 13, when Trump declared a national emergency because of the coronavirus pandemic. But the agency has not provided any timeline for when all of those refunds will occur.

The consumer advocacy groups that brought the lawsuit against DeVos on behalf of borrowers say the Education Department’s response has been woefully insufficient. The suit was filed in D.C. federal court by Student Defense and the National Consumer Law Center, and is being supported by the Student Borrower Protection Center.

“Returning the money several months from now is not acceptable,” said Persis Yu, who directs the National Consumer Law Center’s Student Loan Borrower Assistance Project. “We’re in a national crisis right now, and borrowers need that money right now, and Congress passed a law that said borrowers should keep that money right now.”

Yu said that borrowers who are subject to wage garnishment are already among the most vulnerable — even before the economic collapse caused by the pandemic.

“These are borrowers who were in distress on their loans already,” she said. “They’re the ones holding the bag with the department’s inability to get this done, whatever the department’s intentions are.”

Alex Elson, senior counsel at Student Defense, said that DeVos broke the promise she made to stop wage garnishments in March. “The truth is, she keeps on taking wages from the paychecks of Americans struggling to make ends meet,” he said in a statement. “We are suing to make her stop.”

The plaintiff in the lawsuit, Elizabeth Barber, 59, who lives in the Rochester area, defaulted on about $10,000 in federal student loans in December, according to the complaint. She earns about $12.89 per hour and made about $20,000 in 2019.

Since January, the government has garnished 12 percent from each of Barber’s paychecks, adding to her financial strain. She has seen a reduction in her weekly schedule as a home health aide by 10 to 15 hours per week because of the pandemic, according to the lawsuit.

“The funds that the Department has illegally garnished are essential to Ms. Barber’s ability to satisfy her essential financial obligations during the pandemic,” the complaint says, noting that she is struggling to pay for her housing as well as water and electric bills.

Barber’s wages were last garnished on April 24, according to the complaint, which also says “the garnishment order remains in effect” for her employer to seize a portion of her earnings and send them to the government.

The lawsuit comes after a group of Democrats, led by Rep. Ayanna Pressley (D-Mass.) and Sen. Cory Booker (D-N.J.), said last month they’re concerned that the Education Department hasn’t fully carried out the requirement to stop wage garnishment. “This is simply unconscionable,” they wrote in an April 16 letter to DeVos.

The Education Department said at the time that, through its loan servicer, it had instructed the employers of more than 135,000 borrowers to stop garnishing wages — and planned to send letters to additional employers. “If the Department receives funds from a garnishment between March 13, 2020, and Sept. 30, 2020, the Department will refund — and has already started refunding — those garnished wages,” department spokesperson Angela Morabito said at the time.

Department officials also issued orders to the government's contracted debt collection agencies to stop garnishing wages in March, but the process is complicated by the fact that the government relies on employers to actually take out money from paychecks. The Education Department has previously claimed in court that it has no mechanism to force employers to stop garnishing wages after it has ordered them to start doing so.

“This raises bigger concerns about the wage garnishment process in general,” said Yu, the National Consumer Law Center attorney. “What does it mean that the government has this really incredible tool to garnish wages and they can’t turn it off?”