Education Department halts plans to garnish Social Security benefits for defaulted student loan

Yahoo

4 days ago

Social Security recipients who are behind on their student loans can breathe a sigh of relief — for now.
The US Department of Education said it's pausing plans to garnish Social Security benefits from people with student loans in default.
The department previously announced in April that it would begin collections as soon as June 1 after nearly a five-year hiatus.
That was rattling news for those who depend on those checks to cover their monthly costs.
This week, the Trump administration did an about-face.
'The Department has not offset any Social Security benefits since restarting collections on May 5, and has put a pause on any future Social Security offsets,' Ellen Keast, a Department of Education spokeswoman, told Yahoo Finance in an email on Tuesday.
The administration 'is committed to protecting Social Security recipients who oftentimes rely on a fixed income,' she wrote. 'In the coming weeks, the Department will begin proactive outreach to recipients about affordable loan repayment options and help them back into good standing.'
Other Treasury offsets are proceeding, including wage garnishment for debts, including federal student loans and overdue taxes, which will begin later this summer.
Roughly 452,000 Americans over 62 have student loans in default, according to the Consumer Financial Protection Bureau.
Read more: Should you refinance your student loans?
Approximately 1 in 3 of the 1.3 million Social Security beneficiaries with student loans rely on an average monthly benefit of $1,523 for 90% of their income, according to the CFPB researchers.
'These are folks who likely depend on Social Security for most or all of their income, so this policy by the Trump administration would inflict a great deal of pain — and the dollars involved are far too small to have a significant impact on Social Security's solvency," said Mark Miller, a retirement expert and author of 'Retirement Reboot."
'The fact that people arrive at retirement carrying student loans also is a reminder of the economic pressures people are facing during their working years — the high cost of housing, childcare and tuition, healthcare expenses, and the emergencies that inevitably crop up along the way."
Unemployment also plays a role, Miller said. "So, it's not surprising that some people arrive at retirement still carrying student debt — and that some of them are in default.'
The pause provides time if you've fallen behind on your loans or don't know your status.
Enroll in a repayment plan
If there have been no recent changes to your income or marital status, you can send your most recent Federal 1040 tax return, either signed by you or stamped by your tax preparer, to the Department of Education's Default Resolution Group. This is the first step toward setting yourself up on one of several income-based repayment plans.
Read more: How to apply for IDR forgiveness
If there have been recent changes to your income or marital status, or for other repayment options, reach out to the department at 1-800-621-3115.By subscribing, you are agreeing to Yahoo's
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Financial hardship and disability discharges
As many as 8 in 10 Social Security beneficiaries with loans in default may be eligible to suspend or reduce forced collections due to financial hardship, according to the CFPB.
To show hardship, you'll need to provide documentation of your income and expenses to the Department of Education. If your eligible monthly expenses exceed or match your income, the department may grant a financial hardship exemption.
One in 5 Social Security beneficiaries may be eligible for discharge of their loans due to a disability, according to the CFPB researchers.
The Total and Permanent Disability discharge program cancels federal student loans and halts forced collections for disabled borrowers who meet certain requirements.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work" and "Never Too Old to Get Rich." Follow her on Bluesky.
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