In a rare Saturday legislative session, the Illinois House approved SB3800, sponsored in the Senate by Sen. Edward Maloney (D), and in the House by Reps. Jim Durkin (R) and John D. Cavaletto (R).
The bill allows the Illinois Scholarship Assistance Commission to use administrative wage garnishments to recover defaulted student loans. It was passed unaninmously by the Senate in March 2012. Sens. Anazette Collins (D), James Meeks (D) and John Millner (R) abstained from voting.
The bill then went to the house.
At issue with SB3800, is the $30,000.000 of defaulted student loans on the books and the expense of collecting on those defaulted debts.
Currently, if a student defaults on an Illinois educational loan, ISAC’s only option is to sue each individual in court — a timely and expensive process. If Gov. Quinn signs the bill, now passed by both houses of the General assembly, ISAC will be able to issue adminstrative wage garnishments on employers to collect the debt, giving them the power the U.S. Department of Education has with the Treasury Offset Program.
An administrative wage garnishment is served on an employer and does not require a court order. Students will be able to dispute the debt before the garnishment is in place.
According to the Bureau of Labor Statistics, the unemployment rate for college graduates nationwide is 4 percent, and of those that are employed, many are underemployed.
That represents 88,000,000 people across the country.
What is not in the bill is the maximum amount ISAC can garnish from your wages.
Federal labor laws restrict garnishments to no more than 25 percent of the garnishees income, unless it is for child support or alimony. The U.S. Department of Education cannot garnish more than 10 percent of defaulted student’s wages. No wage garnishment can cause the garnishee’s wages to fall below minimum wage rates.
Considering the dismal employment situation in Illinois, it is unclear how much debt would actually be repaid using this model. Since the order would only be valid in this state, college graduates may simply leave Illinois to avoid garnishment and possibly secure employment in their field elsewhere, thus causing the state to lose the future tax revenues from highly educated residents. Unemployed students who are not on unemployment would still pay nothing.
The bill did not specify if the garnishment applied to unemployment benefits.
In another blow to students, this week schools and parents were notified that money for the Illinois Monetary Assistance Program grants had run out for the 2012-2013 school year. This is the earliest date the grant has depleted its resources in its history.
The MAP grant depletion is devastating and could compound the student loan problem.
The lack of funding may force many low-income students to take out loans, or drop out if they don’t qualify for them, making decent employment look less and less likely in the near future.
Though the maximum MAP grant award for the 2011-2012 school year was $4,720, split between semesters, sometimes that is all that’s needed to bridge the tuition gap and make college a reality. This amount was reduced last year to the 2002-2003 award levels to save money.
According to ISAC, in 2011, over 800,000 students applied for the awards, almost double the number in 2001. Over 300,000 MAP grants were awarded and 41 percent of them were paid out — over 150,000. The mean award was $2,740.
MAP grants are awarded to students whose Expected Family Contribution (EFC) for college expenses is less than $9,000, as determined by the student’s Free Application for Federal Student Aid (FAFSA).