Dept. Of Education Discloses Illegal Seizure Of $2.2 Billion From Student Loan Borrowers – Forbes
In response to a class action lawsuit filed by student loan borrowers, the U.S. Department of Education disclosed that it had intercepted and seized over $2.2 billion in tax refunds owed to a million student loan borrowers, in violation of the CARES Act.
The CARES Act suspended all collections on defaulted federally-held student loans from March 13, 2020 until September 30, 2020. The Act mandates that involuntary collections efforts by the U.S. Department of Education and U.S. Department of Treasury — including the interception and seizure of tax refunds — are to be suspended.
A spokesperson for the Department stated that those seized tax refunds have been returned to borrowers. However, student loan borrowers in the suit allege otherwise. The lead Plaintiff in the class action suit claims that the government intercepted a nearly $7,000 tax refund owed to both her and her husband in April, in violation of the CARES Act. Improperly seized tax refunds are supposed to be returned to impacted student loan borrowers, but the lawsuit alleges that this has not happened.