Dept. Of Education Discloses Illegal Seizure Of $2.2 Billion From Student Loan Borrowers

In response to a category motion lawsuit filed by pupil mortgage debtors, the U.S. Department of Education disclosed that it had intercepted and seized over $2.2 billion in tax refunds owed to 1,000,000 pupil mortgage debtors, in violation of the CARES Act.

The CARES Act suspended all collections on defaulted federally-held pupil loans from March 13, 2020 till September 30, 2020. The Act mandates that involuntary collections efforts by the U.S. Department of Education and U.S. Department of Treasury — together with the interception and seizure of tax refunds — are to be suspended.

A spokesperson for the Department acknowledged that these seized tax refunds have been returned to debtors. However, pupil mortgage debtors within the go well with allege in any other case. The lead Plaintiff within the class motion go well with claims that the federal government intercepted a virtually $7,000 tax refund owed to each her and her husband in April, in violation of the CARES Act. Improperly seized tax refunds are alleged to be returned to impacted pupil mortgage debtors, however the lawsuit alleges that this has not occurred.

In a press launch, Aaron Ament, president of Student Defense (one of many organizations representing the category of pupil mortgage debtors, together with Democracy Forward), acknowledged, “The Department of Education has now admitted to offsetting more than a million student borrowers’ tax refunds in the middle of the pandemic — a practice now prohibited under the CARES Act. We need answers right now, to establish how this was allowed to happen, how many borrowers have been wronged, and how many are still waiting for their money to be refunded.”

Democracy Forward’s senior counsel, Jeffrey Dubner, acknowledged “In response to our class action lawsuit, Trump’s Department of Education admits that it seized billions of dollars in tax refunds from millions of student borrowers, continuing well into the expanding pandemic. It’s stunning that the Trump administration insisted on snatching refunds from families who rely on this money to keep their heads above water. Our lawsuit will continue moving forward to hold the Trump administration accountable for this egregious and continuing mismanagement.”

The class-action go well with, Cole v. Mnuchin and DeVos, was filed on May 29 within the U.S. District Court for the District of Columbia. The go well with alleges that the federal government’s actions violate the Administrative Procedures Act. Read the Complaint right here.

Additional Resources

Here’s What The Stimulus Does – And Does Not – Do For Student Loan Borrowers

Critical New Details Released For Coronavirus Student Loan Relief

Will Student Loan Servicers Penalize Borrowers For Suspending Payments?

Student Loan Borrowers Sue Betsy DeVos For Illegal Wage Garnishments

Dept. Of Education Discloses It Is Illegally Seizing Wages Of 54,000 Borrowers

Student Loan Servicers Are Dinging Credit Reports For The CARES Act Forbearance

Student Loan Borrowers Succeed In Lawsuit Against DeVos

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