In a surprising turn of events, the U.S. Department of Education has hit pause on plans to garnish Social Security from seniors with defaulted federal student loans. This decision affects hundreds of thousands of older Americans who were facing a potential garnishment of their already limited monthly Social Security checks.
A Reversal of Course on Student Loan Collections
Just weeks ago, the Department of Education announced plans to resume aggressive collection for defaulted student loans by garnishing up to 15% of Social Security checks. However, this week, Ellen Keast announced that the department had changed its plans.
“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,” Keast told multiple outlets. This move is a major shift from the department’s plan to reactivate the Treasury Offset program this summer.
The Treasury Offset Program allowed the government to withhold federal payments, such as tax refunds and Social Security benefits, to recover defaulted student debt. This pause is good news for many retirees who depend solely on Social Security checks.
Who is Affected by the Pause
According to the Consumer Financial Protection Bureau (CFPB), approximately 452,000 Americans aged 62 and older have defaulted on federal student loans. Many of these individuals are already receiving Social Security benefits, and the pause provides significant financial relief.
Research from the CFPB shows that about 1 in 3 of the 1.3 million Social Security beneficiaries with student loans rely on benefits for 90% or more of their income. The average monthly Social Security check is just $1,523, meaning that a reduction would lead most to serious financial strain.
The decision to pause the planned garnishment of Social Security benefits aligns with President Trump’s promise to protect benefits for seniors with fixed incomes. Keast reaffirmed this stance in her official statement, where she said, “The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income.”
However, some advocates argue that although the pause is good news for many defaulters, it is not enough because it could be restarted. Persis Yu, Executive Director of the Student Borrower Protection Center, said, “Simply pausing this collection tactic is woefully insufficient. Any continued effort to restart the government’s debt collection machine is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country.”
Why Student Loan Debt Among Seniors Is Rising
The number of older Americans with student loan debt has increased in recent years, mainly because of rising tuition costs and the increased use of Parent PLUS Loans. Many parents and grandparents took out loans to support the children’s education, and some never recovered financially.
Research by the National Consumer Law Center shows that people aged 60 and older owe the government approximately $125 billion in student loan debt, which is a sixfold increase over the past two decades. Besides the increased debt, the number of beneficiaries who have had their checks garnished has grown from 6,200 in 2001 to 192,300 in 2019.
What Seniors in Default Should Do Now
Although the plan to garnish Social Security benefits for those who have defaulted student loan debts has been paused, it is important to regain good standing by doing the following:
- Contact the Default Resolution Group at 1-800-621-3115.
- Submit a signed copy of your most recent Federal 1040 tax return to qualify for income-driven repayment plans.
- Apply for financial hardship exemptions if your expenses exceed your income.
- Explore disability discharge options if applicable. Up to 20% of affected seniors may be eligible for total and permanent disability loan forgiveness.
Conclusion
Although the pause is a relief for many retirees, the future remains uncertain because the Department of Education has not ruled out resuming its loan collection plans. For now, seniors with student loan defaults should consider trying out the options outlined above to regain good standing and also stabilize their finances.