Social Security Payments May Be Lower This Month: Who's Impacted

Newsweek

2 days ago

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Hundreds of thousands of Americans will see their Social Security payments shrink this month as the federal government resumes garnishing benefits from borrowers who defaulted on student loans.
The Department of Education and Treasury Department began issuing notices in May warning approximately 195,000 Social Security recipients that their checks would be reduced, with collections starting in early June.
The Trump administration restarted federal collections on defaulted student loans after a five-year pause, marking the first time since the onset of the COVID-19 pandemic that recipients have been at risk of losing part of their Social Security income to student loan debt.
"This is the latest effort to eliminate some of the forgiveness efforts under the prior administration and take student loans more seriously in terms of repayment," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. "For some Americans, the prospect of seeing smaller checks in the coming months if they fail to start making payments on their own is a very real one.
Why It Matters
The policy shift directly affects older Americans, many of whom rely on Social Security as their main or only source of income.
The Consumer Financial Protection Bureau reported earlier this year that about 450,000 Americans aged 62 and older were in default on their federal student loans and likely receiving Social Security payments. The resumption of garnishments, which were paused for years by emergency pandemic measures, puts financially vulnerable retirees at further risk of poverty.
A Social Security Administration (SSA) office in Washington, D.C., March 26, 2025.
A Social Security Administration (SSA) office in Washington, D.C., March 26, 2025.
SAUL LOEB/AFP via Getty Images
What To Know
Who Is Impacted and How Garnishments Work
The U.S. Treasury Offset Program allows the government to withhold up to 15 percent of monthly Social Security benefits from borrowers in default on federal student loans.
Beneficiaries receiving the average Social Security check of $1,976 could see a reduction of $296.40 per month.
Recipients were shielded from collections and negative credit reporting during pandemic-era protections, but those defenses ended as the administration said it sought to restore accountability to the student loan system.
A borrower is typically considered in default after missing 270 days of payments. Once in default, loans are usually transferred to collection agencies authorized to pursue garnishments through tax refunds, wages, and Social Security payments.
Notices and the Scope of Collections
In May, the Department of Education sent 30-day warnings to 195,000 defaulted student loan borrowers that their benefits would be garnished in June.
All 5.3 million defaulted federal student loan borrowers will receive notice that they could later also face wage garnishment before the end of the summer.
Demographic Impact
The Consumer Financial Protection Bureau found that the number of people aged 62 or older in default on student loans and receiving Social Security has soared, with the affected group growing over 3,000 percent since 2001.
These garnishments primarily pay off accumulated interest and collection fees, with relatively little reducing the original loan principal. Many older Americans facing Social Security offsets rely on these payments for most of their living expenses, and collections often force recipients to choose between paying for basic needs or health care.
Options for Those in Default
Banks and the Department of Education offer borrowers options to return to good standing, but these are often complex and time-consuming.
Borrowers can try loan rehabilitation (making nine on-time payments within 10 months), loan consolidation, or, as a last resort, bankruptcy. Payment plans, deferment, forbearance, or income-driven repayment plans can also be arranged before default to help avoid garnishment.
Financial Risks Beyond Social Security Reductions
Defaulted borrowers may lose eligibility for additional federal student aid and other benefits and may suffer long-term damage to their credit scores. This can affect the ability to access credit, purchase a home, or finance other major purchases.
What People Are Saying
Linda McMahon, Secretary of Education, said in a statement, "As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students. For too long, insufficient transparency and accountability structures have allowed U.S. universities to saddle students with enormous debt loads without paying enough attention to whether their own graduates are truly prepared to succeed in the labor market."
Mike Pierce, Executive Director of the Student Borrower Protection Center,said, "For 5 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."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "With the administration removing any pauses on student loan collections, wage garnishments are going to become common practice for some borrowers. If you receive Social Security benefits and having student loans that have default, know this could be a reality for you moving forward."
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "This could be detrimental for some beneficiaries, as the payments may be their primary source of income. Not receiving what was anticipated is disheartening. However, it's important to note that these garnishments were originally paused in 2020 during the COVID-19 pandemic. Now, the garnishments are set to resume, affecting millions of borrowers."
What Happens Next
The Trump administration is pursuing further reforms to student loan repayment systems and plans to overhaul federal loan programs, as outlined in the One Big Beautiful Bill Act passed by the House of Representatives last month.
Additional regulatory and legislative changes may affect how collections and relief are administered in the future, granted this change is just ending what was supposed to be a temporary pause in Social Security garnishment due to the pandemic.
"The Trump administration isn't making new changes but rather reinstating policies that were paused in 2020," Thompson said.
"At some point, these payments were bound to resume, though many borrowers may have believed their loans would be forgiven under the Biden administration. That forgiveness effort has largely fallen by the wayside, and the Trump administration is now making it clear that all loans must be repaid regardless of whether the institution attended was later deemed predatory."