With two federal student loans in default and a third in forbearance, Shari Stewart is exactly the kind of borrower that could use a break.
A single mother of two in Reno, Nev., Stewart was struggling to repay her combined $77,000-plus student debt long before the coronavirus pandemic struck. But the COVID-19 outbreak only made it worse: She was laid off from her medical assistant job, where she earned $16.28 an hour and was commuting in an 18-year-old clunker that couldn’t pass a smog check. She’s also suffered from medical maladies, including severe rheumatoid arthritis.
The break Stewart needed was her expected $8,231 tax refund — until it was seized and applied to her defaulted debt.
Here’s how this borrower, with an assist from family, was able to assert her rights and get back her tax refund. She hopes her story can help you too.
As part of the CARES Act, the federal government promised to return any tax refunds that were seized on or after March 13. Unfortunately for Stewart, hers was garnished on Feb. 26 — the 41-year-old borrower had filed her returns early, hoping to use some of her IRS-issued check to cover her mounting, high-interest consumer debt.
Stewart and her stepfather, Steve Wilmoth, took the following three steps to retrieve the four-figure tax refund:
On Stewart’s behalf, Wilmoth not only contacted Student Loan Hero for free repayment advice, but he also did some digging of his own. He tracked down a joint open letter sent to Education Secretary Betsy DeVos from five lawmakers, imploring her to return garnished tax refunds from the entire filing season that began Jan. 27.
Wilmoth added the letter to his folder of evidence supporting the case that Stewart should receive relief.
In an ominous February notice, the Department of Treasury had directed Stewart to the Educational Credit Management Corporation (ECMC) — the newest holder of her defaulted Federal Family Education Loan.
After reviewing ECMC’s Tax Offset Hardship Refund Request form, Stewart knew she wouldn’t qualify unless an exception to the eligibility criteria was made. She didn’t fall into any of the listed cases, such as being evicted or having exhausted unemployment benefits.
Fortunately, ECMC customer service directed Stewart to dial another third party: Pioneer Credit Recovery.
Pioneer, for its part, helped Stewart establish a repayment plan for her defaulted loan before transferring Stewart to someone higher up the chain of command. A manager introducing herself as Jennifer recommended that Stewart write a letter of explanation and send it along, which the manager would forward back to ECMC.
But after receiving Pioneer’s apparent response later in the week — a nearly identical refund request form, but with Pioneer’s heading — Stewart worried she was getting the runaround.
“At this point, I felt defeated,” she told Student Loan Hero. “I figured, ‘Well, they obviously can’t help me either.’ [It] felt like a dead end.”
On April 17, as a last resort, Wilmoth helped Stewart pen a letter of her own to Secretary DeVos. They knew they needed someone with decision-making power to create an exemption.
In raw, bare language, Stewart pleaded with DeVos, detailing her precarious financial situation — ending the letter by saying, “I do not know what else to do. Please help!”
For good measure, Stewart submitted copies of the letter to the two senators and governor of her home state of Nevada, as well as to her House representative.
“To be honest, I wasn’t too sure the letter would do much, if anything,” Stewart said in retrospect. “I thought, admittedly, it was a waste of time.”
Certainly, Stewart wasn’t alone in her predicament. In fact, on April 30, the Education Secretary was sued for allegedly continuing to garnish wages of defaulted borrowers after the announced March 13 suspension.
But in the end, Stewart was able to get that refund back on her own.
About a month after amping up efforts to retrieve her lost lump-sum, on April 27, Stewart received a suspect envelope in the mail.
On first look, Wilmoth thought it was merely a fake-check advertisement or scam.
“I took it from him and read the return address — it read, Educational Credit Management Corporation,” Stewart said. “I opened it and pulled out the paper and, holy cow, it was a real check. … I leaped from my chair and waved it in the air.”
Then Stewart sat back down, opened her bank’s app on her phone and “deposited that sucker right then and there.”
Curious as to how the check came her way, Stewart re-dialed Pioneer. While she still doesn’t know exactly what did the trick, she was told by a Pioneer representative that other borrowers were being directed to do the same: Write a letter describing your repayment troubles and, in light of the coronavirus pandemic, your garnished benefit could be returned.
There has been a 50% increase in helpline phone calls since the COVID-19 outbreak prompted the economic collapse, according to business services firm Teleperformance. Stewart’s advice is simple: Dial your loan servicer if you’re late on student loan payments.
And if your federal loan servicer or holder is unhelpful, try dialing elsewhere.
|For issues specific to student loan default…||Education Department’s Default Resolution Group||800-621-3115|
|For questions about your seized tax refund or Social Security check or wage garnishment||Treasury Offset Program||800-304-3107|
|For resolving disputes with your loan servicer||Federal Student Aid Ombudsman||877-557-2575|
Stewart advised that, regardless of whether you have federal loans or private loans in default, don’t ignore the calls or letters from your creditors — otherwise, the news they share will only get worse.
“I know it’s hard, it’s frustrating, and time-consuming to talk to these people, but you have to,” said Stewart, who is now employing loan rehabilitation for her defaulted loans.
Requesting to speak to a manager like Jennifer (beyond a customer service representative) was also helpful in Stewart’s case. The voice on the other end of the line encouraged her to write that letter to Pioneer that ultimately helped deliver relief.
But whether you contact your elected representative or creditor, putting your repayment struggle down on paper is another step worth taking.
“It just gives these people a snapshot of reality in this world,” Stewart said. “This is real — people are struggling. Let them know that you are struggling.”
Note: This article represents one person’s experience. Individual results may vary.