Latest news with #MarkKantrowitz
CNET
8 hours ago
- Business
- CNET
No, Your Social Security Benefits Won't Be Garnished if Your Student Loans Are in Default -- For Now
The Trump administration paused its plan to garnish Social Security benefits for defaulted federal student loans. Pla2na/Getty Images/CNET The Department of Education announced it would pause wage garnishment efforts on Social Security benefits for borrowers whose loans are in default -- for now. In April, the Department of Education warned borrowers whose student loans were in default that involuntary collections would begin this summer. Loan servicers could begin ordering employers to garnish wages up to 15%, and the government could withhold money from income tax refunds and other federal payments, like Social Security benefits. Loan servicers can first report loans that are 90 days past due as delinquent, which can damage your credit score. But once federal student loans are 270 days past due, they enter into default. Monday evening's announcement came just hours before June's first round of Social Security checks were deposited on June 3. "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," a DOE spokesperson said in an email to CNET. The statement also added that the department will proactively reach out to default borrowers about affordable loan repayment options and help them get back in good standing. While that's good news, the pause isn't expected to last forever. Mark Kantrowitz, a student loan and financial aid expert, says the pause could only be temporary. "Borrowers are still at risk of having Social Security disability and retirement benefit payments offset in the future," Kantrowitz said. For now, the federal government can still offset your paycheck or income tax refund if you have defaulted student loans. Here's what you can do to hopefully avoid garnishment and get your student loans in good standing. What to do if your student loans are in default and receive Social Security benefits If your loans are in default, Kantrowitz said that it's still very likely that the Department of Education will reverse the pause because it's the Treasury Offset Program's most effective way of collecting defaulted student loans. So it's best to take action sooner rather than later. "The US Department of Education may have paused the Social Security offsets because it conflicts with the administration's assertions that they aren't cutting Social Security," he said. Elaine Rubin, student loan expert and Edvisors Corporate Communications Director, added that if you receive Social Security benefits but are in default on your student loans, use this pause to explore options to get your student loans back in good standing. "This delay is offering time to explore and complete options to avoid offsets or garnishments in the future," said Rubin. Borrowers in default have options. You could consider loan rehabilitation, where you'll make nine consecutive on-time payments to get out of default, or loan consolidation, which can help you get your loans onto an income-driven repayment plan, potentially lowering your monthly payment. However, if no action is taken, borrowers in default should expect collections if they don't find a way to get their loans out of default before the pause ends, Rubin said. To explore all of your options, contact the US Department of Education's Default Resolution Group.
CNBC
2 days ago
- Business
- CNBC
Federal student loan interest rates just fell for the first time in 5 years—here's what borrowers will pay on new loans
Students and families borrowing money for college will get a slight reprieve for the upcoming school year. The interest rate for undergraduate federal student loans disbursed between July 1, 2025 and June 30, 2026 will be 6.39%, down from 6.53% for the 2024-25 school year, the Department of Education announced on May 30. Graduate loans will come with a 7.94% rate and Parent Plus loans will have an 8.94% interest rate, both lower than the prior year. The last time interest rates dropped for federal student loans was for the 2020-21 school year, when the undergraduate rate fell from 4.53% the previous year to 2.75%. Rates have ticked back up each year since then. Federal student loan interest rates are fixed for the life of the loan and are set by the federal government each year using a formula based on the yield of the 10-year Treasury bond. The Treasury Department sells these bonds at auction and the price can rise and fall based on numerous factors in the broader economy. "The bond yields are complicated," student loan expert Mark Kantrowitz said in an email. "A decrease in buyers might cause the price to decrease, which causes the yield to increase. Even a slight change in investor demand can keep yields high. Tariffs could be a factor, as could changes in the trade imbalance." For example, in 2024, the bond yield rose, bringing student loan interest rates with it — to their highest level in over a decade — in part because of inflation and the Federal Reserve's interest rate hikes, CNBC reported at the time. Borrowers taking out loans for the upcoming school year will have a slightly more affordable repayment, but uncertainty remains in the broader student loan landscape. Historically, financial planners and experts have favored federal student loans over private loans for families who need to borrow money to pay for college. That's because, for some borrowers, federal loans offer a lower interest rate, which means they'll pay back less over the life of the loan versus what they'd pay a private lender. But beyond interest rates, federal student loans come with a number of benefits that often make them a superior option. Subsidized interest, flexible repayment options and leeway during times of financial hardship make federal loans a smart option for many eligible borrowers. While some borrowers with good credit may be able to get a lower interest rate through a private lender, they generally won't receive any of those other benefits. However, several of those benefits could be eliminated in the near future. Republicans in Congress included provisions within their budget reconciliation package that may bring significant changes for current and future federal borrowers if enacted, including fewer repayment options and borrowing limits. For now, the current benefits remain in place. The Senate is currently weighing the bill and could make changes and vote on it in the coming weeks. "Despite the uncertainty around proposals from lawmakers and the White House, students should still explore all federal loan options before considering private loans," Sarah Austin, a policy analyst with the National Association of Student Financial Aid Administrators, said in an email. "Even with proposed or potential changes to the Direct Loan program, it is still highly likely that the benefits of federal loans outweigh any advantages of private loans." Not everyone is eligible for federal student loans, though, so private student loans may be some students' only option if they need to borrow money to pay for school. "As always, when comparing loan options, students should consider interest rates, fees, and repayment terms," Austin said.
CNET
3 days ago
- Business
- CNET
Your Social Security Benefits Won't Be Garnished if Your Student Loans Are in Default -- for Now
The Trump administration paused its plan to garnish Social Security benefits for defaulted federal student loans. Pla2na/Getty Images/CNET In another recent turn of student loan news, the Department of Education announced it would pause wage garnishment efforts on Social Security benefits for borrowers whose loans are in default. In April, the Department of Education warned borrowers whose student loans were in bad standing that wage garnishment efforts would begin this summer. A borrower's tax return or up to 15% of their paycheck or Social Security benefits could be withheld. Monday evening's announcement came just hours before June's first round of Social Security checks were deposited. Checks are expected on June 3, 11, 18 and 25 -- depending on your birthday. If your student loans are in default, you should expect to get your full payment. However, Mark Kantrowitz, a student loan and financial aid expert, says that the pause could only be temporary. "Borrowers are still at risk of having Social Security disability and retirement benefit payments offset in the future," Kantrowitz said. For now, the federal government can still offset your paycheck or income tax refund if you have defaulted student loans. Here's what you can do to hopefully avoid garnishment and get your student loans in good standing. What you can do if your student loans are in default If your loans are in default, Kantrowitz said that it's still very likely that the Department of Education will reverse the pause because it's the Treasury Offset Program's most effective way of collecting defaulted student loans. So it's best to take action sooner rather than later. "The US Department of Education may have paused the Social Security offsets because it conflicts with the administration's assertions that they aren't cutting Social Security," he said. Borrowers in default have options. You could consider loan rehabilitation, where you'll make nine consecutive on-time payments to get out of default, or loan consolidation, which can help you get your loans onto an income-driven repayment plan, potentially lowering your monthly payment. To explore all of your options, contact the US Department of Education's Default Resolution Group.
Yahoo
4 days ago
- Business
- Yahoo
June Social Security Checks Could Drop Sharply Due To Student Loan Garnishments — Experts Share Ways To Get Relief
Retirees who have defaulted on their student loans may see a reduction in their Social Security checks from June. This is a result of the U.S. Department of Education's decision to recommence involuntary collections on defaulted student loans, including garnishing wages, intercepting tax refunds and seizing a portion of Social Security benefits. What Happened: The U.S. Department of Education is set to recommence collection activity on the nation's $1.6 trillion student loan portfolio, after a nearly five-year pause due to Covid-era policies. According to the CNBC report, the garnishments will start in June and the affected retirees may receive reduced Social Security checks from this month onwards. Trending: Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing — As per Forbes, several retirees could see their monthly Social Security checks reduced significantly, in some cases down to just $750. However, the actual reduction will depend on factors such as the recipient's birth date and when they began receiving benefits. However, according to Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, borrowers have options to halt these payment offsets. Higher education expert Mark Kantrowitz states that federal student loan borrowers should have been given at least 30 days' notice before their Social Security benefits were offset. He notes that borrowers can avoid or halt the offset by proving financial hardship or having a pending loan discharge. Meanwhile, Betsy Mayotte, president of The Institute of Student Loan Advisors, suggests that opting for an income-driven repayment plan could be a way out. Borrowers with severe, permanent mental or physical disabilities that prevent them from working may qualify for a Total and Permanent Disability (TPD) discharge, using proof from a doctor, the SSA, or the VA, suggest It Matters: The resumption of involuntary collections on defaulted student loans is part of a broader trend of financial challenges facing retirees. The Consumer Financial Protection Bureau estimates that over 450,000 federal student loan borrowers aged 62 and older may be impacted by this change. Furthermore, the resumption of student loan payments has had a significant impact on borrowers, with some seeing steep drops in their credit scores. This has created additional financial strain for retirees who are already facing the prospect of reduced Social Security benefits. As retirees navigate these financial challenges, it's important for them to explore all available resources, including charitable organizations that assist with health-care costs and food assistance programs. Additionally, retirees facing garnishments on their Social Security benefits may be able to prevent or stop the offset by proving a financial hardship or pursuing a discharge with their student loan servicer. Read Next: Hasbro, MGM, and Skechers trust this AI marketing firm — Invest before it's too late. Deloitte's fastest-growing software company partners with Amazon, Walmart & Target – Many are rushing to grab 4,000 of its pre-IPO shares for just $0.30/share! Image via Shutterstock Send To MSN: Send to MSN UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga? This article June Social Security Checks Could Drop Sharply Due To Student Loan Garnishments — Experts Share Ways To Get Relief originally appeared on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
27-05-2025
- Business
- Yahoo
Thousands of retirees may soon see Social Security checks docked by 15% as Trump admin resumes collections
For millions of older Americans relying on an embattled Social Security system to cover their bills, another financial gut punch may be on the way — and it's coming from their own student debt. Under a Trump administration move to resume collections on federal student loans, borrowers in default could soon see their Social Security benefits docked by as much as 15%, higher education expert Mark Kantrowitz told CNBC. Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) That means retirees already living on fixed incomes could lose a big chunk of their monthly checks with little warning. And for the hundreds of thousands of borrowers 62 and older who have defaulted student loans — it could be an unhappy surprise in the mail. The government has long had the power to claw back a portion of Social Security benefits to repay defaulted federal student loans. But those collections were paused during the COVID-19 pandemic. The pause was extended under the Biden administration, but President Trump has restarted the clock. The Department of Education recently announced the administration will resume involuntary collections as early as June, meaning borrowers in default could once again be subject to wage garnishments, tax refund seizures and offsets to Social Security checks. And there's a big population at risk. Recent federal data shows that nearly 3 million people over the age of 62 hold federal student loans. The Consumer Financial Protection Bureau says more than 450,000 borrowers in that age group have defaulted on their federal student loans while receiving Social Security benefits. Many of these borrowers are parents who co-signed loans or took out Parent PLUS loans for their children and fell behind after job losses, medical expenses or other financial shocks, according to the National Consumer Law Center. 'Borrowers who receive these notices should not panic,' Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program, told CNBC. 'They should reach out for help as soon as possible.' Read more: This is how American car dealers use the '4-square method' to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs If you're in default, the federal government can withhold up to 15% of your monthly Social Security benefit without your permission. The offset kicks in automatically, unless you act to stop it. If you get such a notice, it's important to know your entire benefit won't be wiped out. Federal law protects the first $750 per month of Social Security income from garnishment. But for seniors already scraping by, even a small deduction can have a devastating impact. The worst thing you can do is ignore the problem. If you're in default or nearing default, there are steps you can take now to reduce the risk of garnishment. First, you may be able to request a hearing or file a request to stop or reduce the offset. If you're facing medical issues, supporting dependents or already living below the poverty line, you can submit documentation proving financial hardship to the Treasury Department or its debt collection agency. Second, consider reentering good standing through loan rehabilitation or consolidation. These programs allow borrowers to make a series of small payments to bring their loans out of default. Once you're out, you're no longer at risk for Social Security offsets, but you have to act quickly. Loan rehabilitation typically requires nine monthly payments, and the process can take several months. If you're still working and planning to retire soon, Trump's repayment effort should be a wake-up call. Retiring while in student loan default is now risker than ever. For some, it may make sense to delay retirement until the loan is resolved, especially if garnishment would push you below your living threshold. You might also need to rethink your savings strategy. If your retirement income plan was built around a full Social Security check, it's time to reassess. You may need to increase 401(k) or IRA contributions, trim expenses or explore additional income sources to make up the shortfall if garnishment kicks in. And for those still in the workforce with aging loans, now is the time to check your status. Are your loans in good standing? Are you on an income-driven repayment plan? The answers to those questions could make or break your retirement security. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
