CARES Act Suspends Garnishments on Some Federal Student Loans For Six Months

Employers can be ordered to garnish their employees’ earnings to collect on defaulted student loans.  Two federal laws allow for such deductions:

  • The Higher Education Act (HEA), and
  • The Debt Collection Improvement Act (DCIA)

By now, many of you have read news articles about the new federal stimulus bill temporarily suspending payments on federal student loan garnishment.  This is correct, but keep reading.

Section 4513 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) temporarily suspends payments on federal student loans under the HEA until September 30, 2020.  The CARES Act also suspends interest accrual on these loans during this time.  The Act makes no mention of suspension of DCIA student loan garnishments.

Employers currently processing HEA federal student loan garnishments should cease these withholdings temporarily.

Prior to the passage of the CARES Act, on March 25, 2020, Secretary of Education Nancy DeVos announced a two-month suspension of student loan processing beginning March 13, 2020.  The CARES Act extends this suspension of payment for an additional four months but doesn’t mention a specific start date.  Based on the Secretary’s announcement, employers can use March 13, 2020, as the start date.

How do you know if the federal student loan garnishment you are processing is under the HEA or the DCIA?  HEA student loan garnishments come from guaranty agencies designated by the U.S. Department of Education for each state.  Each agency creates its own forms, but they typically refer to the HEA by name or by its public law number (P.L. 89-239).  DCIA student loan garnishments are easier to spot as they come from the U.S. Dept. of Treasury, and they are on government-issued forms.

Contact us if you have questions about your HEA student loan garnishments and this temporary suspension of payments.