Starting in June, some Social Security beneficiaries may find their checks are smaller due to garnishments for defaulted student loans. The U.S. Department of Education has resumed collection activity on the country’s $1.6 trillion student loan portfolio, a policy change that follows the cessation of Covid-era relief measures. More than 450,000 federal student loan borrowers aged 62 and older are in default and likely to be receiving Social Security benefits, according to the Consumer Financial Protection Bureau.
Social Security benefits, which many recipients rely on for most, if not all, of their income, can now be garnished if the recipient has defaulted on their student loans. Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, acknowledges the panic this has caused but notes that there are options for relief. One of the first steps for borrowers is understanding their rights and learning how to challenge the garnishment.
Federal student loan borrowers should receive a 30-day notice prior to any offset of their Social Security benefits. This notice includes details on whom to contact to challenge the collection activity. Borrowers can prevent or stop the garnishment by proving financial hardship or having pending student loan discharge applications.
For those experiencing significant health challenges, they might qualify for a Total and Permanent Disability (TPD) discharge if they suffer from a severe and permanent disability that prevents them from working, supported by documentation from a doctor, the Social Security Administration, or the Department of Veterans Affairs.
Garnishments impact Social Security checks
Another way to avoid offsets is by getting current on the loans.
Betsy Mayotte, president of a nonprofit student loan counseling organization, advises that borrowers can enroll in income-driven repayment plans. For many, this can result in payments as low as zero if Social Security is their only income. Social Security recipients can see up to 15% of their monthly benefits garnished to pay back defaulted student loans, but they must be left with at least $750 a month.
This offset is calculated from the total benefit amount before deductions such as Medicare premiums. Retirees concerned about their ability to meet expenses on a fixed income may explore additional relief options. Various charitable organizations assist seniors with healthcare costs, and there are resources for finding local aid for various services.
Many seniors are also not utilizing all available food assistance programs. The Supplemental Nutrition Assistance Program (SNAP) provides crucial support, though less than half of eligible seniors reportedly participate. Utilizing SNAP benefits can significantly aid retirees managing on limited incomes.
For further assistance and to explore relief options, affected individuals should seek guidance from their loan servicers and consumer aid organizations.
