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Newsweek
02-06-2025
- Business
- Newsweek
Social Security Checks Could Shrink for 450,000 Americans in June
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Almost half a million Americans could see smaller Social Security payments this month if they are behind on federal student loan repayments. Why It Matters Earlier this year, the Consumer Financial Protection Bureau found that some 450,000 Americans aged 62 and older were in default on their student loan payments, with many of them likely to be collecting Social Security checks. In recent years, those who had fallen behind on payments were protected from collections because of coronavirus-era provisions. However, the Trump administration confirmed in April that aggressive debt collection practices would resume at the beginning of May. What To Know As of May 5, the White House resumed these offsets for borrowers in default, including automatic deductions from Social Security payments. Under the Treasury Offset Program, the federal government can withhold up to 15 percent of a person's Social Security benefits to recover defaulted federal student loans. For beneficiaries receiving the average $1,976 monthly payment from the Social Security Administration, if their benefit was garnished by 15 percent, they would lose $296.40 every month. Millions of beneficiaries across the country rely on Social Security payments for a considerable chunk, if not all, of their income in later life. So garnishment could have a significant effect on personal finances. But there are options available for those needing to get back on track with their federal loans. "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," Tom O'Hare, a holistic college adviser at Get College Going, told Newsweek. "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," he continued. A stock image of a person pulling U.S. dollar bills from a wallet. A stock image of a person pulling U.S. dollar bills from a wallet. GETTY How Can I Make Payments? To keep yourself clear of garnishment, you can set up a payment plan. "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, a financial aid specialist at Earnest, told Newsweek. "Programs like income-driven repayment can adjust your monthly payment to better match your budget." Effects of Not Paying If you remain in default on your loans, Social Security garnishment may be only one of your worries. Failure to pay can mean you lose access to important benefits, such as deferment, forbearance and the ability to choose a repayment plan that fits your financial situation. You also become ineligible for further federal student aid, including Pell Grants and new student loans, which could limit your ability to continue your education. The default is reported to credit bureaus, which can significantly damage your credit score. In turn, this can affect your ability to finance major purchases, such as a car or home, and can even prevent you from obtaining credit cards. Rebuilding your credit may also take several years. What People Are Saying Secretary of Education Linda McMahon said in a statement on May 5: "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, the executive director for the Student Borrower Protection Center, said in a statement on April 21: "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." What Happens Next Further changes to student loans are likely on the way. In an effort to streamline student loan repayment, the Trump administration is considering a sweeping overhaul of its federal loan programs, cutting back the available income-driven repayment options to two. The plans were put forward in the GOP's One Big Beautiful Bill Act, which the House of Representatives passed late last month.
Newsweek
15-05-2025
- Business
- Newsweek
Social Security Benefits to Be Confiscated for Nearly Half a Million People
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. 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. GETTY 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.
