Student Loans

The CARES Act, which was passed by Congress on March 27, 2020, gives relief to some individuals with federal student loans, including suspensions on employer garnishments. Specifically regarding garnishments, the CARES Act states that “during the period in which the Secretary [of Education] suspends payments on a loan [through September 30, 2020] the Secretary shall suspend all involuntary collection related to the loan, including . . . wage garnishments authorized under section [20 U.S.C. 1095a] or [31 U.S.C. 3720D].” What is important to note is that the loan forbearance and garnishment relief only applies to loans that are held by the Department of Education. There are numerous federal student loans not held by the Department of Education and, thus, not protected from garnishment. Accordingly, districts must be cautious about stopping federal loan garnishments to ensure it is only done for loans held by the Department of Education.

The Department has stated it must rely on employers to make the change to borrowers' paychecks, so it will monitor employers' compliance with the request to stop wage garnishment. The Department further stated that for borrowers who are protected from garnishment, but where money is still being taken from a paycheck on or after March 13, 2020, the Department will provide a letter to their employer’s HR department that instructs the employer to stop the wage garnishment. Districts can rely on that notice from the Department of Education to the district to move forward with suspension of garnishment.

Given the Department of Education’s reliance on employers, if you intend to be proactive regarding your employees who may qualify for this garnishment relief, you can contact the collection agency or loan servicer for each employee you typically garnish for federal student loans to determine if the loan is held by the Department of Education. If you can definitively confirm that a certain employee’s loan is held by the Department of Education, you could stop garnishing on that loan based on the CARES Act. Again, it may not be necessary to take the step of doing independent investigation into whether the Department of Education holds a particular loan, given the forthcoming Department of Education letters.

The Department of Education also should be sending notices to borrowers about the suspension of garnishments. And so, districts may also start hearing from employees who receive their letters from the Department of Education regarding garnishment relief. If an employee provides you with a copy of their letter from the Department of Education, but you have yet to receive a letter directly from the Department of Education, you should contact the collection agency/loan servicer to confirm the employee’s loan is held by the Department of Education prior to ceasing the garnishment.

It is also important to note that if you have garnished an employee’s wages for a loan held by the Department of Education after the CARES Act went into effect, the Department of Education will refund the borrower’s garnished wages; there is nothing the district would need to do as an employer regarding these prior garnishments at this time.

Other Garnishments

There is nothing in the CARES Act regarding other garnishment orders from courts or other agencies; it only applies to federal student loans held by the Department of Education. As of the date of this blog post, the Ohio House and the U.S. Senate both recently introduced legislation that would stop garnishment from creditors and other collection efforts until after the COVID-19 emergency has subsided. Yet neither bill has been passed as of yet. In the interim, districts should continue to comply with any active garnishment orders from courts or other agencies, unless you hear otherwise from the specific court or agency. Further, districts may start to experience a slowdown in some of the garnishment requests or orders, given the downtrend of work in many courts and agencies based on COVID-19. We anticipate that the courts/agencies will catch up with the orders once the emergency has subsided so districts may expect an influx at a point in the future.