The Coronavirus Aid, Relief, and Economic Security (CARES) Act offers individuals temporary, short-term relief from their student debt obligations. That’s welcome news for any employees currently in the process of repaying their loans from school.
For employers, though, this provision opens up several key questions: What are the specifics of this particular relief initiative? And how does it impact wage garnishments for employees with defaulted student loans?
What Employers Should Know About the New Student Loan Provision
Under provisions established in the CARES Act, borrowers are excused from making payments on their federal student loans from March 13 through Sept. 30, 2020. Additionally, borrowers will receive 0% interest on qualifying loans during that same time period. It’s important to note that while private lenders are encouraged to follow suit, this repayment relief only applies to federal, not private, loans.
Of particular interest to employers, the provision will also stop garnishments of wages, Social Security and tax refunds for borrowers with defaulted student loans. As a result, it’s up to employers to halt wage garnishments for qualifying employees through mid-May, according to a recent news release from the U.S. Secretary of Education.
Employers should receive notifications from the company that’s serving the loan on behalf of the Education Department. If an employer is still waiting on notification, they or the employee may want to contact the lender to kickstart the notification process. Just be prepared for longer-than-usual wait times.
Lastly, qualified amounts already deducted from employees paychecks, will be returned directly to the employee — not the employer — from the Department of Education. Employers may want to inform impacted employees of this process.
How to Stop Garnishments in Orbit Solutions
If you’re a Payroll Data client and have determined that you need to stop garnishments, it’s a quick and painless process. Simply log in to Orbit Solutions and end date the current garnishment for impacted employees.
For a reminder on how to do this, check out our learning aid that’s saved in the system (My Info > Help > My Learning (Classic) > Administrator - Payroll > Section 5. Payroll Administration > Maintaining Employee Scheduled Deductions in the System). And remember, your client service representative (CSR) is always there to help!
At Payroll Data Services, we understand this is a challenging time and we will continue to provide information and resources to get you through it. To stay posted on the latest developments, make sure you follow us on LinkedIn and Facebook.