[ZERO] Trump administration officials are preparing to penalize millions of Americans in default on their federal student loans next year, The Washington Sun reported, citing five people familiar with the matter. The Treasury Department is moving forward with plans to hire private debt collectors, possibly as soon as November, three of the sources said, and those plans are unlikely to be announced before the midterm elections.
| The Education Department said it had collected roughly $500 million from defaulted borrowers before the pause. |
According to the Treasury's Sept. 30 release - there are more than 5 million borrowers who have been in default for over six years and another 5 million who entered default in less than a year.
The plan would revive collections the administration shelved this year. As we noted in January, the Education Department said it would begin garnishing wages in January, with up to 15% of a borrower's after-tax income at stake and about 1,000 notices expected the first week. That same month, however, ABC News reported that the department paused both wage garnishment and Treasury Offset Program collections - tax refund seizures included. Under Secretary Nicholas Kent said the tools "will function more efficiently and fairly" after reforms, and the department said it had collected roughly $500 million from defaulted borrowers before the pause.
According to the Sun, last year the White House Office of Management and Budget began helping the Education Department prepare to seize federal benefits and wages from defaulted borrowers, and Treasury officials blocked the effort, citing the economic cost of punitive measures against workers. Staff said they warned senior Treasury officials that scores of Trump supporters would be seriously hurt by going after the wages and benefits of people struggling to keep their jobs. "This is not who you think it is. The demographics are not good for us," one source said. |