Student loan borrowers file new class action lawsuit over illegally foreclosed tax refunds

Student loan borrowers apparently can’t get a break.

The CARES Act suspended all collections on delinquent student loans held by the federal government from March 13, 2020 to September 30, 2020. The law requires that the involuntary collection efforts of the United States Department of Education and the United States Treasury Department – including payday garnishments, Social Security compensations, and the garnishment of federal tax refunds against borrowers in default of their federal student loans – must be suspended.

The education ministry did not fully comply with the CARES law’s suspension of wage garnishments, leading 54,000 student loan borrowers to continue to be garnished weeks after the start of the wage garnishment. the CARES law. They filed a complaint.

Next, the federal student loans department began probing borrowers’ credit reports due to the CARES Act’s automatic payment suspension. They filed a complaint.

Now, student loan borrowers have filed a new lawsuit against Education Secretary Betsy DeVos and Treasury Secretary Steven Mnuchin, alleging that the government also continues to illegally intercept federal tax refunds in direct violation of the CARES law.

In the complaint, the principal plaintiff alleges that the government illegally seized a tax refund of almost $ 7,000 owed to her and her husband; the seizure took place in April. The Education Department is supposed to refund any tax refunds improperly seized after March 13, 2020, but the lawsuit alleges that did not happen.

Student loan borrowers are represented by nonprofits, Student Defense and Democracy Forward. In a statement, Alice Yao, Senior Student Advocacy Advisor, said: “Amid this devastating pandemic, Secretary Mnuchin and Secretary DeVos have illegally cleared tax refunds from student borrowers despite clear instructions from Congress. and the president to stop. The administration has shown complete disregard for the law and the needs of student loan borrowers during this difficult time, and their botched deployment of the CARES law protections is causing real suffering to families across the country. We are moving forward to ensure borrowers get the relief they are entitled to and to hold this administration accountable for its continued failures to implement the CARES Act. ”

“Secretaries DeVos and Mnuchin have inflicted unnecessary financial hardship on student borrowers and their families by not stopping illegal foreclosures of their tax refunds,” said Jeffrey Dubner, senior counsel for Democracy Forward. “The unrest caused by the ongoing pandemic is no excuse for breaking the law. Our class action seeks to hold the administration to account so that student borrowers can stand up during this crisis. “

The class action, Cole v. Mnuchin and DeVos, was filed on May 29 in U.S. District Court for the District of Columbia. The lawsuit alleges that the government’s actions violate the Administrative Procedures Act. Read the complaint here.

Additional resources

Here’s what the stimulus does – and doesn’t – for student loan borrowers

New critical details released for student loan relief against coronavirus

Will Student Loans Officials Penalize Borrowers For Suspending Payments?

Student loan borrowers sue Betsy DeVos for illegal wage garnishment

Education ministry reveals illegally seizing salaries of 54,000 borrowers

Student Loans Officials Worried About Credit Reports For Cares Law Abandonment

Student loan borrowers win lawsuit against DeVos

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