Millions of Americans who depend on Social Security could face cuts to their monthly payments starting in June — all because of unpaid federal student loan debts. This development has raised concerns among seniors who may not realize their benefits are on the line.
What’s Happening? Debt Collection is Back in Action
During the COVID-19 pandemic, the federal government paused many aggressive student loan collection efforts, including those targeting Social Security benefits. However, as of May 5, these collection efforts have resumed.
The Department of Education and the White House announced the return of the Treasury Offset Program (TOP) — a tool that allows the government to take up to 15% of delinquent borrowers’ Social Security payments to cover unpaid federal student loans. Importantly, even with these deductions, recipients must still receive at least $750 each month.
Who is Affected?
According to recent data, nearly 2.9 million Americans aged 62 and older still carry federal student loan debt — a number that has grown sharply, increasing over 70% since 2017. Among these, more than 450,000 seniors are currently in default on their loans, meaning they haven’t made payments in over 270 days.
These are the individuals most at risk of having their Social Security benefits reduced starting this summer.
How Does the Offset Work?
Before any money is taken, borrowers will receive a formal notice of intent to offset their benefits — sent to their last known address. This notice gives them about 65 days before garnishment begins and also warns of potential negative credit reporting.
However, borrowers who received this notification prior to the pandemic might not get another one, as the government typically sends this notice only once.
Why This Matters Now
The aggressive collection efforts paused during the pandemic were resumed under the current administration in an effort to recover billions of dollars in unpaid student loans. While this is a longstanding practice used for over 20 years, the return of garnishments is causing anxiety among seniors who rely on Social Security as their primary source of income.
Tom O’Hare, a college counselor familiar with federal student loan policies, explained that once a borrower is 270 days delinquent, their loan is transferred to a collection agency. These agencies have the authority to use tools like wage garnishment and Social Security offsets to recoup the debt.
What Seniors Need to Know and Do
If you or someone you know is at risk, it’s important to take action quickly:
- Check for notices: Even if you didn’t get a recent letter, verify your loan status through your loan servicer or the Department of Education.
- Understand your rights: Social Security benefits cannot be reduced below $750 per month, and only up to 15% of your payment can be taken.
- Explore repayment options: Loan rehabilitation or consolidation might help stop collection efforts. Contact your loan servicer or a financial counselor for guidance.
No New Notifications for Some Borrowers
A spokesperson for the Department of Education told CNBC that some borrowers won’t receive new offset notices if they were notified before the pandemic. This means many seniors may not be aware their Social Security payments are about to be affected.
Looking Ahead: Uncertain Changes
As the program continues, the Education Department has not announced plans to issue new warnings or modify the offset process. Collections have resumed, and Social Security deductions may begin impacting payments as soon as June.
Final Thoughts
For many seniors, Social Security benefits are a lifeline. The prospect of having part of those benefits withheld is troubling — especially for those who might be unaware of their loan status or their options to resolve defaults.
If you’re facing this situation, don’t delay in seeking help. Organizations like the Consumer Financial Protection Bureau and local financial aid offices can provide assistance.
“This article was written by Mathew Owen. AI tools were used lightly for grammar and formatting, but the ideas, words, and edits are all mine.”
