Social Security beneficiaries who are in default of their federal student loans have a bit of good news coming their way as the Trump Administration has decided to make a u-turn on a decision that impacted this cohort.
The initial plan was to resume garnishments from Social Security beneficiaries in default after a pause had been put into effect since March 2020 as a result of the COVID-19 pandemic. Notices regarding these garnishments were sent out to borrowers in default in May. Fortunately for these individuals, however, it appears that the pause on garnishments will be reinstated — but for how long will this reprieve last?
Here is what you need to know.
Department of Education pauses plan to garnish Social Security benefits
In May, the Trump Administration announced that the Treasury Offset Program would be restarted. Through this program, the government would be able to withhold up to 15% of a Social Security benefit in order to repay the federal student loan of those in default until the borrower becomes current with their loan. According to guidelines, however, the benefit check could not be reduced to lower than $750 after garnishment. Additionally, the Supplemental Security Income (SSI) was to remain fully protected from any garnishments.
The Department of Education has now decided to let the pause on garnishments that had been put in place during the COVID-19 pandemic in March 2020 continue on for the time being.
“The Department of Education said it will pause plans to garnish Social Security benefits, opting to continue the policy that’s been in place since the COVID pandemic began in March 2020,” according to a report from CNBC.
Whilst the pause has been reinstated, it is only temporary and garnishments are expected to start up later this summer. Ellen Keast, a U.S. Department of Education spokesperson, explained to CNBC that “the Social Security pause would give borrowers more time to get current on their payments.”
“The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income,” Keast said.
Will my benefits be garnished?
CNBC has reported that “there are some 2.9 million people ages 62 and older with federal student loans, a 71% increase from 2017 when there were 1.7 million such borrowers.” Close to 500,000 borrowers from this cohort are likely to receive Social Security but are also in default of their loan repayments.
“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, shared with Newsweek. “They were suspended to assist delinquent borrowers during COVID-19 and during the remaining time the former Administration was in office.”
At the beginning of May, the Department of Education began sending out notices to around 195,000 student loan borrowers informing them that their benefits would now be subject to garnishment from the government through the Treasury Offset Program which forms part of the U.S. Department of Treasury. As these notices continued to roll out, in total, approximately 5.3 million borrowers in default had received one. For every delinquent loan case, the department is required to give the individual a 30 day notice prior to any garnishment or withholding.
“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 outlines. “The notice may only be sent once, and offsets will continue until your debt is paid or the default status is resolved.”
As such, any reversal on these plans regarding Social Security would require at least a month’s notice. However, no sign has been shown by the Trump Administration that garnishments for Social Security benefits will be pursued.