Student loans were supposed to be suspended, but $ 40 million in student loan debt was canceled anyway
Student loan payments were to be suspended during the Covid-19 pandemic, but $ 40 million in student loan debt was still foreclosed.
Here’s what you need to know.
In a nightmare scenario for some student loan borrowers, their wages were taken to pay off their student loans – even when it was not allowed. The Student Borrower Protection Center, a leading nonprofit student loan advocacy organization, discovered through a Freedom of Information Act (FOIA) request that approximately $ 40 million in wages had been seized from student loan borrowers, even though the U.S. Department of Education has banned wage garnishment from paying student loans during the Covid-19 pandemic. Imagine for a moment that you are a student loan borrower. In response to the Covid-19 pandemic, Congress passed the Cares Act – the $ 2.2 trillion stimulus package – in March 2020 and halted all mandatory federal student loan payments, fixed rates of 0% federal student loan interest and stopped all collection of delinquent student loans. However, one way or another, your salary was improperly garnished to pay off your student loans. Here is what happened.
Student loans: what happened?
Based on data provided by Federal Student Aid, the Student Borrower Protection Center alleges that the guarantee agencies that operate the Federal Family Education Loan Program (FFELP) – which are private student loans issued before 2010 by banks and financial institutions and were guaranteed by the federal government – did he not comply with orders from the US Department of Education to stop garnishing the salaries of student loan borrowers who have defaulted on their student loans. This includes:
- A guarantee agency, Ascendium, continued to collect $ 3.9 million in wages from defaulting FFELP student loan borrowers in June 2021;
- Guarantee agencies have failed to reimburse $ 12.9 million in cumulative wages seized since October 2020, but as of June 2021 had still not reimbursed these inappropriate wage garnishments, despite orders from the Department of Education. to do ;
- a Additional $ 24.8 million in wages were garnished from defaulting FFELP student loan borrowers from March 2020 to October 2020;
Overall, the Student Borrower Protection Center reports that as of June 2021, $ 37 million in inappropriate wage garnishments were not reimbursed to student loan borrowers – even though these guarantee agencies were required by the Department of Education to reimburse these salaries. “The results of our FOIA application clearly show that despite [the U.S. Department of Education’s] orders, the most vulnerable student loan borrowers continued to have money withdrawn from their paychecks during an ongoing pandemic, ”the Student Loan Protection Center wrote.
Student loan relief: what happens next
The student loan relief, which includes this temporary forbearance of student loans and non-collection of delinquent student loans, will end on January 31, 2022. However, that has not stopped the Center for Student Loan Protection from seeking. to hold guarantee agencies to account. In a letter to the Consumer Financial Protection Bureau (CFPB), which is the country’s main consumer watchdog, the Student Loan Protection Center writes that:
- it is not known how many borrowers have been harmed by this inappropriate perception of wages to pay off student loan debt;
- how much money has been repaid to student loan borrowers;
- what best practices and rules are in place to ensure that student loan borrowers get that student loan relief to which they are legally entitled; and
- greater transparency and accountability should be implemented so that student loan borrowers are treated fairly.
There are approximately 6 million student loan borrowers who collectively owe over $ 153 billion in FFELP student loans. About 880,000 of these student loan borrowers are on student loans on $ 23.7 billion FFELP student loans.
What to do if you have a FFELP student loan
If you have FFELP student loans and your wages were entered incorrectly, contact Federal Student Aid at the US Department of Education and your student loan manager to ensure you get a refund. You can also contact the Consumer Financial Protection Bureau. If you’ve defaulted on your student loans, good news may be on the horizon. Student loan cancellation has become a hot topic on Capitol Hill, and Congress is considering making it easier to cancel student loans for millions of student loan borrowers. To convert your FFELP student loans to direct loans, contact your student loan manager to consolidate your FFELP student loans into a direct consolidation loan. With a Direct Consolidation Loan, you will no longer have FFELP student loans and will be eligible for Income Based Repayment Plans and the Public Service Loan Forgiveness Program, for example, among other benefits. You will also become eligible for your student loan waiver.
Student loan relief is ending soon. Make sure you’re ready to start student loan payments again, including updating your automatic payment information. Understand all of your options. When it comes to paying off a student loan, here are some popular ways to save money: