In January, APA met with the U.S. Department of Education (ED) about student loan garnishments. The ED told APA that it was considering reforms to some of its debt collection practices for student loan borrowers who default on their loans. One piece of the reform is improving garnishment practices.
Resuming Garnishments After the Pause
On November 22, 2022, the ED announced an extension of the federal student loan relief until issues concerning the student loan forgiveness program are settled by the U.S. Supreme Court.
During the meeting with the APA, the ED said that loans will return to repayment about two months after the U.S. Supreme Court has reached a decision. The process will include a 90-day safety net period for borrowers who do not make payments will be placed into a forbearance to bring their account current. Another 360 days will pass before the ED transfers collections to a private entity. At some point after those days, the ED expects the wage garnishment process to begin.
Issues for Payroll
For APA members, issues include the need for new orders when collections will resume through wage withholding. This is because employees may have changed jobs and amounts due may not be the same as orders before collections were paused.
Because the garnishment process would potentially restart for all borrowers at the same time, employers may receive an initial larger number of orders. The APA requested as much notice as possible for employers to prepare.
The January meeting was the start of an ongoing dialogue with the ED.
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Adam Prinzo is the Assistant Manager of Government Relations at APA