Daily Tax Report ®

Devos Sued Over Seizure of Student Tax Refunds Amid Crisis (2)

May 29, 2020, 10:51 PM

Education Secretary Betsy DeVos was accused in a lawsuit of illegally seizing millions of dollars in tax refunds from students who defaulted on federal loans despite a congressional ban on such collections during the pandemic.

The groups Student Defense, and Democracy Forward, filed the proposed class-action lawsuit, which also named Treasury Secretary Steven Mnuchin, Friday in Washington, saying the collections are part of the the Trump Administration’s “botched” roll-out of the $2 trillion coronavirus relief bill.

The legislation suspended wage garnishments and other involuntary collections on federal student loans until Sept. 30 “to help families weather the economic fallout of the coronavirus pandemic,” the groups said in a statement. The ban includes a Treasury program that garnishes tax refunds, they said.

One of the plaintiffs, Kori Cole, a graduate of Heritage College in Lakeside, Colorado, said she received a Treasury notice in April saying her and her husband’s entire $7,000 federal tax refund was seized. She currently owes $23,000 on loans she took out for an X-ray technician and medical assistant course, according to the complaint. Her husband’s woodworking business, their only source of income, was shuttered during the pandemic.

Read More: U.S. Is Sued Over Student Loan Wage Garnishments Amid Crisis

The plaintiffs seek a court order halting the practice and a return of the allegedly seized checks.

Education Department press secretary Angela Morabito said in a statement that as of May 28 more than $2.2 billion in seized Treasury funds had been refunded to more than 1 million borrowers.

The Treasury Department didn’t respond to a request for comment.

(Updates with comment from Department of Education)

To contact the reporter on this story:
Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Anthony Lin, Joe Schneider

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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