Pressley, Warren, Booker, Colleagues to Education Department: What Steps Are You Taking to Protect Student Borrowers’ Wages and Benefits

July 14, 2021
Press Release
“Even before the pandemic, collections on defaulted student loans were catastrophic for borrowers in default, who saw their wages, tax refunds, and even Social Security checks confiscated, in addition to being forced to pay exorbitant fees.”

Text of Letter (PDF)

WASHINGTON – Today, Congresswoman Ayanna Pressley (MA-07), and Senators Elizabeth Warren (D-Mass.), Cory Booker (D-N.J.), led a letter to Secretary of Education Miguel Cardona requesting information about what actions the Department of Education (ED) plans to take to support student borrowers in default as the scheduled end of paused student loan payments, collections, and interest approaches in October.

ED has a number of administrative options to collect the outstanding debt on defaulted student loans. Through wage garnishments, ED is able to collect up to 15% of a borrower’s disposable pay to repay the debt. ED may also refer the loan to the Treasury Department, which is able to withhold a borrower’s tax refunds - including the newly expanded Child Tax Credit (CTC) and Earned Income Tax Credit (EITC), Social Security, or other federal payments - to repay the debt. If a borrower does not enter into a repayment agreement on their defaulted federal student loans, then ED refers these defaulted loans to private collections agencies (PCAs) that charge a collection fee amounting to 17.92% of the outstanding balance, significantly increasing the amount owed.

As of March 2020, when the pandemic and economic downturn were just beginning, about 7.7 million borrowers’ loans were in default. Nearly 45% of borrowers in default reported that they had not found a path to return their loan to good standing. In 2016, the Government Accountability Office (GAO) found that approximately 114,000 borrowers over age 50 had more than $171 million in Social Security benefits withheld because of defaulted student loans. 

“As we near the currently scheduled end of the suspension of payments and collections, we are concerned about plunging borrowers back into an untenable financial situation, causing long-term damage to their credit and financial stability and a sudden unnecessary drag on our recovering economy,” wrote the lawmakers. 

Although the Coronavirus Aid, Relief, Economic Security Act (CARES Act) established relief for borrowers by suspending payments and halting debt collections on defaulted loans, ED and Treasury still improperly garnished and withheld at least $200 million from approximately 390,000 borrowers during this time. The failure to fully implement the collections moratorium raises concerns about how ED and Treasury will handle the upcoming scheduled resumption of collections and payments on October 1, 2021. 

Joining the lawmakers in signing the letter are Reps. Henry C. “Hank” Johnson, Jr., Yvette D. Clarke, Pramila Jayapal, Diana DeGette, Janice D. Schakowsky, Rashida Tlaib, Katie Porter, Juan Vargas, Eleanor Holmes Norton, James P. McGovern, Alexandria Ocasio-Cortez, Jahana Hayes, Peter DeFazio, Mary Gay Scanlon, and Suzanne Bonamici.

In February, Congresswoman Pressley and Senator Warren, along with Senate Majority Leader Chuck Schumer and their colleagues, reintroduced their bicameral resolution outlining a bold plan for President Biden to tackle the student loan debt crisis by using existing authority under the Higher Education Act to cancel up to $50,000 in student loan debt for Federal student loan borrowers. The lawmakers renewed their calls earlier this month at a press conference to call on Biden to cancel up to $50,000 in student debt through executive action.

On April 13, Rep. Pressley testified at a Senate Banking subcommittee hearing to examine the student loan debt crisis in our country. In her testimony, Rep. Pressley discussed the racial and economic implications of canceling student debt, as well as her own experience with the student loan system. Full video and transcript of her testimony is available here.

On April 1, Rep. Pressley, Senator Warren, and Massachusetts Attorney General Maura Healey held a press conference at which they called on President Biden to tackle the student loan debt crisis by using existing authority under the Higher Education Act to cancel up to $50,000 in student loan debt for Federal student loan borrowers.

Congresswoman Pressley has been leading the legislative fight for broad based student debt cancellation. Reps. Pressley, Alma Adams, and Ilhan Omar have repeatedly led their colleagues in calling on House leadership to take urgent action to combat the student debt crisis by including  student debt cancellation in any COVID relief package. In March, Pressley and Omar introduced the Student Debt Emergency Relief Act, legislation to cancel  student loan debt and shield borrowers from any involuntary payments and garnishment during the COVID-19 crisis.

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