Student Loan Relief Extension and Wage Garnishments: What Employers Need to Know
September 23, 2020
The U.S. Department of Education (DOE) recently announced the extension of student loan relief through the end of the year. This notice is a response to President Trump’s direction to the Secretary of Education to pause payments and waive interest on DOE student loans until Dec. 31, 2020. The announcement was welcomed by both students and parents across the country, providing more immediate financial freedom as the COVID-19 pandemic continues. Since the payment suspension has been extended, the collection of any defaulted and federally-held loans also remains halted. Naturally, this affects the collection of student loan wage garnishments from employers.
Preparing for the Extension
If you have employees who defaulted on their federally-held student loans, you’re familiar with the process of garnishing their wages. However, due to the ongoing COVID-19 crisis, the DOE announced on Mar. 25, 2020, that wages would not be garnished as a means of financial relief for borrowers. Employees who had garnishments processed from Mar. 13, 2020, to Sept. 30, 2020, would receive a refund for the garnished wages and their employer would be notified to stop further collections. The new extension allows employees to benefit from three more months of financial relief from wage garnishments. To prepare your business for the extension:
- Leverage your payroll software to change the last day of not collecting student loan wages from Sept. 30, 2020, to Dec. 31, 2020.
- Classify the wages of each employee whose paycheck you garnish; separate student loan garnishments from other garnishments you’ll still need to collect to ensure these are paid on time.
- Keep an open line of communication with employees who have their wages garnished due to a defaulted student loan; they may not be aware of the extension and could find great relief in the extra money.
Effectively Manage Garnishments
Handling the student loan wage garnishment changes can be a hassle on top of all of the other garnishments you manage. Avoid the consequences of improperly handling garnishments with DM Payroll Solutions’ wage garnishment management tool. Easily prioritize other garnishments to be addressed and paid out first, as well as pause your student loan garnishments until the extension expires. To learn more about how our wage garnishment solutions can simplify your process, contact us today.