Ed. Dept. Stops Collecting on Defaulted Student Loans, Tells Agencies to Do Same

The Department of Education announced yesterday that it has stopped collecting on defaulted student loans and has ordered private collection agencies working on its behalf to halt collection activities “until further notice,” according to a published report, which cites a memo that was sent to collection agencies.

Individuals with defaulted student loans will also stop having their assets and tax refunds seized and can receive their Social Security benefits.

Collection agencies working on behalf of the Department of Education have been ordered to stop making outbound calls to individuals with defaulted student loans, stop sending them collection letters, and taking steps to seize their paychecks.

It is expected that student loans will be included, in some form, in the stimulus package that Congress passes to help the economy manage and recover from the coronavirus pandemic. Republicans and Democrats were wrangling over what form that relief would take, according to the report. Republicans were calling for a six-month forbearance on student loan payments, while Democrats wanted to include the cancellation of at least $10,000 in debt.

Last week, the Department of Education had announced it was waiving the interest on federally guaranteed student loans for the foreseeable future. At that time, individuals needed to only make principal payments.

Collection agencies are still allowed accept incoming calls from individuals willing to make payments on their unpaid student loans, according to the report.

The Education Department will also stop referring accounts to the Treasury Department, which is in charge of seizing tax refunds and stopping the payment of Social Security benefits.

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