Student Loan borrowers with defaulted loans have found themselves aggressively pursued by the Department of Education and private debt collectors. Borrowers in default face garnished wages, decreased social security payments, and may risk having their IRS tax returns withheld, Reuters reported.
Seth Frotman, a senior member of the Consumer Financial Protection Bureau (CFPB), told Reuters. “We treat struggling student-loan borrowers the same as deadbeat parents and tax cheats. Even gambling addicts have more protections.”
In its report, Reuters found that since 2015, $3 billion in garnished wages and $4.8 billion in withheld tax refunds and Social Security benefits have been seized to collect on delinquent loans.
Currently, there are 8 million borrowers with defaulted loans. Many of those borrowers are members of the most financially vulnerable in society. However, Reuters reported that state and federal regulators allege that loan servicers intentionally fail to direct borrowers to an affordable repayment plan.
In early 2017, the CFPB filed a lawsuit against Navient, the largest student-loan servicer in the US. In the suit, CFPB accuses Navient of adding $4billion in student debt because Navient failed to offer income-based repayment plans to struggling borrowers. Rather, Navient consistently pushed its borrowers into forbearance because it was less costly for the company. For many borrowers, forbearance is a more expensive option over time.
Several other state attorney generals have since filed similar suits.
A representative for Navient spoke to Business Insider insisting that the company works hard to reach borrowers and help them enroll in repayment options and avoid the negative consequences of delinquency and default. “We promote awareness of repayment options 154-170 million times annually to our 10 million federal loan customers,” according to the representative. “However, 90 percent of federal loan borrowers who default have not responded to our outreach.”