There are millions of Americans who rely on Social Security as a financial backbone, especially for seniors. As of this summer, a change of policy means that an approximate 15% of benefits could be garnished for recipients who are behind on their federal student loans. This could cause a major impact on millions of citizens.
There are over 5 million citizens who are in default on their federal student loan. According to NBC New York, these rates are increasing.
Amongst these defaulters are retirees and vulnerable populations. For some, Social Security benefits represent the bulk of their income. The announcement noted that these individuals will receive outreach and support in setting up repayment plans.
A Lifeline for Millions
According to the Centre on Budget and Policy Priorities, Social Security lifted approximately 22 million Americans above the federal poverty line in 2023. Approximately 16.3 million of these citizens were elderly adults aged 65 and older.
Beyond statistics, the message is clear: Social Security is the financial backbone for the elderly. More than two decades of annual surveys from the national pollster Gallup conclude that up to 90% of retirees require their monthly benefit, to some degree, to make ends meet.
This isn’t about comfort or convenience, it’s about survival.
Garnishment: A Looming Threat
The U.S. Department of Education has confirmed plans to resume garnishment of Social Security benefits for borrowers in default on federal student loans. This program had temporarily been paused during the COVID-19 pandemic and was never resumed since then; however, it is set to restart later this summer.
According to the Trump Administration, Social Security beneficiaries could potentially see a monthly deduction of up to 15% on their Social Security benefits. However, a proviso of this rule is that recipients must be recipients must be left with at least a $750 Social Security benefit. For example, if your monthly benefit is $825 per month, the maximum garnishment would be $75 per month instead of the flat 15%.
Retirees With Student Debt: A Growing Reality
As surprising as it may seem, there is an increasing number of retirees who are still under student loan debt. From the period of 2017-2023, the average number of student loan borrowers under the age of 62, decreased by 1% but the number of student loan borrowers aged 62 and above had increased by 59%, this data is based on the Consumer Financial Protection Bureau (CFPB).
What’s Next: Pause, Outreach, and Repayment Plans
Per the Department of Education, Social Security offsets are delayed for a few months, with a restart scheduled later this summer. Meanwhile, the department plans to begin proactive outreach to defaulted borrowers, offering help with income-driven repayment plans, loan rehabilitation, and consolidation options
Understanding Alternatives to Garnishment
Borrowers in default may access several strategies to avoid garnishment altogether:
- Income-Driven Repayment Plans (IDR): Monthly payments tied to income, potentially as low as $0.
- Rehabilitation or Consolidation: Timely repayment methods to exit default status.
- Student Loan Forgiveness or Discharge: Available for disability, employment in public service, or other qualifying conditions.
These options can stop garnishment under the Treasury Offset Program
Final Takeaways for Borrowers
- Expect garnishment to remain on pause for the immediate future (mid‑summer 2025).
- Look out for official communication from the Department of Education regarding repayment options.
- Explore income-based repayment, consolidation, or rehabilitation to avoid garnishment.
- Stay informed about new legislative protections that could permanently shield Social Security benefits from loan defaults.
It is crucial for beneficiaries to keep updated with relevant information from verified sources to ensure that they are able to make proactive decisions to avoid financial strain.