Latest news with #Federal1040
Yahoo
6 days ago
- Business
- Yahoo
Education Department halts plans to garnish Social Security benefits for defaulted student loans
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 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 subscribing, you are agreeing to Yahoo's Terms and Privacy Policy 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. Sign up for the Mind Your Money newsletter Sign in to access your portfolio
Yahoo
6 days ago
- Business
- Yahoo
Education Department halts plans to garnish Social Security benefits for defaulted student loan
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 subscribing, you are agreeing to Yahoo's Terms and Privacy Policy 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. Sign up for the Mind Your Money newsletter
Yahoo
6 days ago
- Business
- Yahoo
Education Department halts plans to garnish Social Security benefits for defaulted student loan
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 subscribing, you are agreeing to Yahoo's Terms and Privacy Policy 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. Sign up for the Mind Your Money newsletter Sign in to access your portfolio
Yahoo
04-05-2025
- Business
- Yahoo
Student loan collections restart May 5: Here's what you need to know
The federal government on Monday will resume collecting defaulted student loan payments from millions of people for the first time since the start of the pandemic, officials said. The Trump administration said it would collect the debt through a Treasury Department program that withholds payments through tax refunds, wages and government benefits. The U.S. Education Department has not collected on defaulted loans since March 2020. Of the nearly 43 million people who owe money, only a little more than a third have made regular payments, the agency said. In the last five years, student debt has grown to $1.6 trillion, officials said. Education Secretary Linda McMahon said taxpayers would now be saved from shouldering that cost. 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' McMahon said in an April 21 news release announcing the restart of collections. The move comes after years of legal back-and-forth about loan forgiveness and at a time when advocates say student borrowers are stretched thin from inflation and growing concerns over the cost of living. 'We're in the worst student loan landscape that we've ever been before,' said Sabrina Calazans, executive director of the Student Debt Crisis Center, a nonprofit that advocates for student debt cancellation. 'The plans and proposals being put forth by the Trump administration are going to harm millions of individuals and families,' Calazans added. 'It's going to create a financial catastrophe where folks will not be able to meet their basic needs.' All borrowers in default should have received an email from the Office of Federal Student Aid alerting them to the changes. Officials said the email urges borrowers to contact the Default Resolution Group to either make a monthly payment, enroll in an income-based repayment plan or sign up for loan rehabilitation — a process that can erase a default status if the borrower makes a set of payments during a specific time frame, depending on the type of loan. To schedule monthly payments, borrowers who have not changed their marital status or income would have needed to send their most recent Federal 1040 tax return to the Education Department, according to instructions outlined on the Default Resolution Group's website. The Education Department said it will be using the Treasury Department's Offset Program to collect on the debt by withholding payments through tax refunds, salaries and benefits like Social Security payments. Under the program, the government can withhold entire federal tax refunds and up to 15% of a federal worker's disposable pay. The government said the FSA would send notices about wage garnishment later this summer. In an April opinion piece published in The Wall Street Journal, McMahon said borrowers who don't make payments on time will see their credit scores go down, 'and in some cases their wages automatically garnished.' Before leaving the White House in January, then-President Joe Biden announced his administration had canceled student debt for more than 5 million people, including many who attended schools that defrauded students, like DeVry University, as well as public service workers and those with total and permanent disabilities. 'Since Day One of my Administration, I promised to ensure higher-education is a ticket to the middle class, not a barrier to opportunity, and I'm proud to say we have forgiven more student loan debt than any other administration in history,' Biden said in a statement at the time. In its April news release, however, Trump's Education Department made it clear that 'there will not be any mass loan forgiveness' going forward. McMahon blamed the Biden administration for transferring hundreds of billions of dollars in debt to taxpayers and keeping borrowers in a 'confusing limbo' about payments. 'The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,' she said. Trump paused collection on most federal student loans in March 2020, and Biden continued to pause collection when he took office in 2021. Biden had proposed allowing eligible borrowers to cancel up to $20,000 in debt until the U.S. Supreme Court ruled against his student loan debt relief plan in 2023. The plan would have cost more than $400 billion, and about 43 million Americans would have been eligible to participate. In the Wall Street Journal op-ed, McMahon said Biden 'never had the authority to forgive student loans across the board.' She said resuming collections was not an act of unkindness to student borrowers but an act of fairness. 'Borrowing money and failing to pay it back isn't a victimless offense. Debt doesn't go away; it gets transferred to others,' she said. 'If borrowers don't pay their debts to the government, taxpayers do.' This article was originally published on
NBC News
04-05-2025
- Business
- NBC News
Student loan collections restart May 5: Here's what you need to know
The federal government on Monday will resume collecting defaulted student loan payments from millions of people for the first time since the start of the pandemic, officials said. The Trump administration said it would collect the debt through a Treasury Department program that withholds payments through tax refunds, wages and government benefits. The U.S. Education Department has not collected on defaulted loans since March 2020. Of the nearly 43 million people who owe money, only a little more than a third have made regular payments, the agency said. In the last five years, student debt has grown to $1.6 trillion, officials said. Education Secretary Linda McMahon said taxpayers would now be saved from shouldering that cost. 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' McMahon said in an April 21 news release announcing the restart of collections. The move comes after years of legal back-and-forth about loan forgiveness and at a time when advocates say student borrowers are stretched thin from inflation and growing concerns over the cost of living. 'We're in the worst student loan landscape that we've ever been before,' said Sabrina Calazans, executive director of the Student Debt Crisis Center, a nonprofit that advocates for student debt cancellation. 'The plans and proposals being put forth by the Trump administration are going to harm millions of individuals and families,' Calazans added. 'It's going to create a financial catastrophe where folks will not be able to meet their basic needs.' What happens now? All borrowers in default should have received an email from the Office of Federal Student Aid alerting them to the changes. Officials said the email urges borrowers to contact the Default Resolution Group to either make a monthly payment, enroll in an income-based repayment plan or sign up for loan rehabilitation — a process that can erase a default status if the borrower makes a set of payments during a specific time frame, depending on the type of loan. To schedule monthly payments, borrowers who have not changed their marital status or income would have needed to send their most recent Federal 1040 tax return to the Education Department, according to instructions outlined on the Default Resolution Group's website. The Education Department said it will be using the Treasury Department's Offset Program to collect on the debt by withholding payments through tax refunds, salaries and benefits like Social Security payments. Under the program, the government can withhold entire federal tax refunds and up to 15% of a federal worker's disposable pay. The government said the FSA would send notices about wage garnishment later this summer. In an April opinion piece published in The Wall Street Journal, McMahon said borrowers who don't make payments on time will see their credit scores go down, 'and in some cases their wages automatically garnished.' What happened to loan forgiveness? Before leaving the White House in January, then-President Joe Biden announced his administration had canceled student debt for more than 5 million people, including many who attended schools that defrauded students, like DeVry University, as well as public service workers and those with total and permanent disabilities. 'Since Day One of my Administration, I promised to ensure higher-education is a ticket to the middle class, not a barrier to opportunity, and I'm proud to say we have forgiven more student loan debt than any other administration in history,' Biden said in a statement at the time. In its April news release, however, Trump's Education Department made it clear that 'there will not be any mass loan forgiveness' going forward. McMahon blamed the Biden administration for transferring hundreds of billions of dollars in debt to taxpayers and keeping borrowers in a 'confusing limbo' about payments. 'The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,' she said. Trump paused collection on most federal student loans in March 2020, and Biden continued to pause collection when he took office in 2021. Biden had proposed allowing eligible borrowers to cancel up to $20,000 in debt until the U.S. Supreme Court ruled against his student loan debt relief plan in 2023. The plan would have cost more than $400 billion, and about 43 million Americans would have been eligible to participate. In the Wall Street Journal op-ed, McMahon said Biden 'never had the authority to forgive student loans across the board.' She said resuming collections was not an act of unkindness to student borrowers but an act of fairness. 'Borrowing money and failing to pay it back isn't a victimless offense. Debt doesn't go away; it gets transferred to others,' she said. 'If borrowers don't pay their debts to the government, taxpayers do.'
