Social Security Benefits to Be Confiscated for Nearly Half a Million People

Newsweek

15-05-2025

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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Millions of Americans who rely on Social Security could see some of their monthly benefits seized, starting in June, if they have defaulted on their student loan debts.
Why It Matters
Roughly 2.9 million Americans aged 62 or older hold federal student loan debt, a number that has grown by more than 70 percent since 2017, according to the U.S. Department of Education. According to CNBC, more than 450,000 elderly borrowers are currently in default and potentially subject to benefit reductions.
What to Know
The Trump administration has resumed aggressive collection efforts that were paused during the COVID-19 pandemic.
Through a process known as Treasury Offset Program (TOP), the federal government can offset up to 15 percent of Social Security benefits to repay defaulted federal student loans. They cannot reduce your monthly check to lower than $750.
"Before the offset begins, a notice of intent to offset will be sent to your last-known address to inform you that the offset and negative credit reporting are scheduled to begin in 65 days," the Federal Student Aid website explains. "The notice may only be sent once, and offsets will continue until your debt is paid or the default status is resolved."
Social Security Administration logo, taken at a office branch in April 2022.
Social Security Administration logo, taken at a office branch in April 2022.
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Starting May 5, the White House resumed these Treasury offsets for borrowers in default, including automatic garnishment from Social Security payments.
"It should be noted that these debt recovery practices are not new and have been in use for over two decades," Tom O'Hare, holistic college advisor at Get College Going, explained to Newsweek. "They were suspended to assist delinquent borrowers during COVID-19 and during the remaining time the former Administration was in office."
A Department of Education spokesperson told CNBC that borrowers may not receive new notices if they were already warned prior to the pandemic: "The notice may be sent only once, and borrowers may have received this notice before COVID."
How Do Collections Work?
"A borrower who has failed to pay on their federal student loan is considered in default when the loan delinquency reaches 270 days past due," O'Hare said.
"The loan is generally reassigned from loan servicers to a collection agency that works on behalf of the federal government to either litigate or implement stringent collection recovery practices, including wage garnishment and deduction from Social Security payments."
But for defaulted borrowers, there are still ways of getting back on track.
"First, reach out to your loan servicer. They can guide you through available options like deferment, forbearance, or creating a flexible repayment plan," Bethany Hubert, financial aid specialist at Earnest, told Newsweek. "Programs like income-driven repayment can adjust your monthly payment to better match your budget."
What People Are Saying
Education Secretary Linda McMahon said in a piece for the Wall Street Journal: "If you are a student borrower with a federal loan balance and haven't been making payments, you must restart payments now."
Student Borrower Protection Center (SBPC) executive director Mike Pierce said in a statement: "For five million people in default, federal law gives borrowers a way out of default and the right to make loan payments they can afford. Since February, Donald Trump and Linda McMahon have blocked these borrowers' path out of default and are now feeding them into the maw of the government debt collection machine. This is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country."
What's Next
Collections resumed on May 5, and seizures could begin affecting June benefit payments. The Department of Education has not indicated whether it will review the process or issue a new round of warnings.