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June 3, 2009
Dear Employer,
You recently
received a notice from the U.S. Department of Education
concerning a change in how we process payments received from
employers when an employee is under an Administrative Wage
Garnishment Order. Please be advised we understand that many
businesses have debit blocks set up on their accounts to protect
them from unauthorized ACH debits. The way our Treasury
lockboxes work is there is an application that can convert any
check received into an ACH debit or an electronic truncated
check. Debit blocks and other account tools used by banks to
prevent fraud will not prevent your check from being cleared
through our Treasury lockboxes.
The Federal government backs billions of dollars annually in
education loans to students and their parents made by banks,
schools, and the government itself. Most students repay their
debts. However, between 10 percent and 15 percent of these
borrowers do not repay their loans. Many of these borrowers are
employed and able to make payments. When borrowers default, it
is ultimately the taxpayers that pay the expense for their
education loans.
As the agency responsible for administering the programs that
provide this Federal loan financing, the U. S. Department of
Education (ED) pursues collection of student loans aggressively
through borrower contact, credit reporting, litigation,
collection agencies and offset against Federal payments, such as
Federal income tax refunds. ED also uses another tool for
collection of defaulted student loans– garnishment of wages of
defaulted borrowers. The Higher Education Act, (P.L 102-164; 20
U.S.C. § 1095a) authorizes ED as well as student loan
guaranty agencies to collect defaulted
Federally-financed student loans by means of an administrative
order to the employer, and without the need for a court order.
This order requires the employer to withhold and pay over to ED
or the guarantor up to 15% of the debtor's disposable pay. This
Federal law supersedes any state law governing wage garnishment.
ED believes that the availability of wage withholding to collect
these loans encourages many employed defaulted borrowers to
repay their loans voluntarily. In those cases where borrowers
continue to refuse to honor their obligations, wage withholding
is an effective debt collection tool. Since ED implemented its
Wage Withholding in 1993, the collection of defaulted student
loans has increased dramatically. Both the Department of
Education and student loan guarantors have increasingly used
this tool over the past several years, recovering hundreds of
millions of dollars.
Relying on a separate, newer Federal law, the U.S. Department of
Education can now order employers to withhold 15% of disposable
pay (unless the debtor provides ED with written consent to
deduct a greater amount) to satisfy loan or grant obligation (s)
owed to the Department. The Department now relies on 31 U.S.C. §
3720D, enacted by Section 31001(o) of the Debt Collection
Improvement Act of 1996 (DCIA), Pub. L. 104-134,110 Stat.
1321-358 (Apr. 26, 1996). The cooperation from employers has
contributed and will continue to contribute to the significant
results in this program. ED has worked to minimize any direct
impact the program might have on your business operations. If
you have any questions, please contact ED's Administrative Wage
Garnishment Branch (AWG) at (404) 562-6013 or email us at
awg@ed.gov.
Administrative Wage Garnishment Employer's Handbook
If the information contained in the sections above do not answer all of your questions, our employer's handbook is available for download below and will provide you with more complete information about the wage withholding program, instructions for calculating, withholding and remitting wages, and sample letters.
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