Social Security Recipients Could See Checks Garnished if They're Behind on Student Loans

Older Americans who default on their federal student loan debt can risk losing up to 15% of their monthly Social Security benefits. And while this hasn't been an issue for several years, some lawmakers say they're concerned that if the practice resumes soon, it could lead to more older adults in poverty.

Congressional Democrats sent a letter flagging the issue last week to administration officials. Falling behind on loan payments can lead to serious financial consequences for borrowers, they said, and the garnishment of Social Security benefits to pay off older adults' student loan debt was a growing issue before the pandemic. But for years, no benefits have been garnished thanks to the student loan payment pause.

That pause ended last fall, followed by a 12-month "on-ramp" period of temporary credit protection.

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After that runs out, however, older adults who default on student loans could be at risk of having their benefits garnished: a "devastating practice," per the lawmakers.

“We are concerned that borrowers will face the extreme consequences associated with missed payments when protections expire in late 2024,” Sen. Elizabeth Warren, D-Mass., and more than 30 other legislators said in the letter. “At this point, many borrowers could once again face Social Security offsets due to defaulted student loans.”

In general, borrowers who were in default before the payment pause got a "fresh start" on repayment on 2022. The Department of Education said this step, which affords them certain benefits, would remove the harmful effects of federal student loan delinquency and default and allow folks to access repayment plans.

The on-ramp and the Fresh Start program both end in late September. It's unclear how long after that it would be until anyone's Social Security checks are garnished for federal student loan debt.

Still, the lawmakers behind the letter are calling for the Biden administration to exempt Social Security benefits from garnishment under what's called the Treasury Offset Program.

“As a growing number of older Americans have federal student loan debt when they near or enter retirement age, we are concerned that these older borrowers are disproportionately subject to TOP collection,” the letter says.

Many older adults rely on Social Security to pay their bills, and the garnishment of benefits can equate to the loss of hundreds of dollars in monthly income.

The lawmakers note that 3.5 million people 60 and older have student loan debt. To be clear, that’s not the number of people who could be at risk of garnishment — only the subset of borrowers who default are potentially vulnerable. In 2015, about 114,000 borrowers had Social Security checks offset to pay back defaulted student loan debt, and about half of those people were receiving disability benefits (not retirement benefits), according to a Government Accountability Office report.

But the risk remains, and the Democrats are pushing to stop it. They've requested a briefing on the issue by April 3.

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