A recent cause for concern faced by beneficiaries of Social Security has been the matter of garnishments and clawbacks. Millions of retirees, survivors, or disabled individuals rely on their monthly Social Security benefit checks to help cover their expenses for the month such as housing or food. These benefit checks form a significant — and sometimes sole — source of income for many beneficiaries and as such, having a percentage of their monthly income garnished or clawed back could spell major trouble for their financial stability.
The matter of these Social Security cuts have come about as a result of the changes being implemented at the Social Security Administration (SSA) under the Trump Administration. However, there has been some back and forth regarding exactly when and by how much these clawbacks and garnishments will be implemented. Here is what you need to know.
Social Security clawbacks for overpayments
Overpayments of benefits occur for various reasons and can be a mistake from either the agency or the beneficiary. Under the Biden Administration, the clawback rate for overpayments was capped at 10% or $10, with the higher amount of the two taken. Under the current Trump Administration, however, the clawback rate for overpaid benefits has now been raised to 50%. Before being dropped to 50% in an “emergency meeting”, the withholding rate was initially announced to be 100%, as it had been during both the Obama Administration and the first Trump Administration.
“Obviously, it’s better not to lose all of your income,” said Kate Lang, director of federal income security at Justice in Aging.
“But if you’re relying on your benefits to pay your rent or your mortgage and buy food, losing half of that income is going to be devastating and can still result in people becoming homeless.”
15% Garnishment rate for delinquent loans
Towards the end of April, the Trump Administration announced that collection efforts would be resumed for those in default of their federal student loan payments. These collections had been put on pause for almost five years since March 2020 as a result of the COVID-19 pandemic. Subsequently, “sometime this summer,” defaulters can expect to see a 15% garnishment of their Social Security benefits when the pause is lifted.
The nation’s federal student loan debt currently stands at over $1.6 trillion and around 425,000 defaulted federal student loan borrowers are currently recipients of Social Security benefits. According to data from the Consumer Financial Protection Bureau, “between 2017 and 2023, the number of federal student loan borrowers aged 62 and above surged by 59% to roughly 2.7 million.”
Additionally, “the CFPB estimates that a whopping 82% of Social Security beneficiaries currently in default on their federal student loans would qualify for the hardship exemption,” as per data collected by the Federal Reserve Board’s Survey of Household Economics and Decisionmaking.
How to approach these garnishments
If a beneficiary has an overpayment balance, the SSA will have sent a notice detailing this to them and the beneficiary will have options to potentially reduce the withholding rate.
In the case of receiving an overpayment notice, the beneficiary can apply to have the withholding of their benefits waived — provided this request is submitted within 90 days of receiving the notice. Form SSA-632BK, “Request for Waiver of Overpayment Recovery” must be submitted to the agency. Documentation proving income and expenses will likely be needed as well, and if the fault of the overpayment lies with the SSA, the agency could potentially grant your request to waive repayments.
Alternatively, the beneficiary could appeal the notice of overpayment by submitting Form SSA-561, “Request for Reconsideration.” This option could be utilized by those who are aware that they have been overpaid but do not feel that the overpayment amount calculated by the agency is correct.
The final option available for those with overpayment balances is to file Form SSA-634, “Request for Change in Overpayment Recovery Rate.” This method will mean admitting that you have been overpaid, however, having half of your monthly benefit withheld will cause significant financial burden.