The Trump administration may be "improperly" seizing defaulted student borrowers' tax refunds by failing to provide the required notice, some lawmakers say.
"These seizures have already led to evictions and utility shutoffs that are harming American families," more than a dozen House Democrats, including Reps. Jamie Raskin of Maryland and Frank Pallone of New Jersey, wrote in a Sept. 26 letter to Education Secretary Linda McMahon.
The federal government has extraordinary collection powers on its student loans, and it can take hold of borrowers' tax refunds, paychecks, and Social Security retirement and disability benefits. After a half-decade pause of collection activity on federal student loans due to Covid-era policies, the Trump administration announced on April 21 that it would resume the garnishments.
However, creditor agencies, including the Education Department, are required to warn borrowers of a possible upcoming offset about two months beforehand, the lawmakers said.
"The purpose of that 60-day notice is to equip the student borrower with the necessary information to prevent the seizure of their tax refund or Social Security benefits," the members of Congress write.
According to the Education Department's website, borrowers will receive notice "to inform you that the offset and negative credit reporting are scheduled to begin in 65 days." It also notes that 65-day time frame in a section on actions borrowers can take after they receive a notice of intent to offset.
The agency did not respond to a request for comment.
10 million student loan borrowers could be at risk
Some 10 million student borrowers are already, or soon may be, in default and are at risk of getting their tax refund seized, according to the lawmakers' letter.
The Education Department website states that the offset notice "may only be sent once."
Lawmakers wrote in their letter that it appears the Trump administration may consider any warning of intent to offset a benefit or tax refund — even if it was issued years ago and before the pandemic — sufficient to satisfy its requirement for notice.
Legally, that may be the case, said higher education expert Mark Kantrowitz. However, he said, "there is no precedent where there was a delay of several years between the time the U.S. Department of Education issued a notice of intent to offset and when the offset occurred."
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The department's failure to give some borrowers recent notice of offsets raises concerns about the accuracy of its latest data on borrowers' "true outstanding balance" and contact information, the lawmakers write. The Trump administration's termination in March of nearly half of the staff at the Education Department, including many of the people who assisted borrowers in the Federal Student Aid office, may be exacerbating the problem.
"Many borrowers have likely gotten married; moved across state lines; become parents of dependent children; or have suffered drastic misfortunes that aren't reflected in their individual profiles with the now-gutted FSA," the members of Congress wrote.
According to their letter, "The Department should consider borrowers' potential life changes as an additional responsibility for issuing a renewed notice before collecting on a defaulted student loan."
