Changes to Social Security Benefits Due to Student Loan Garnishment
Some recipients of Social Security benefits may notice a reduction in their June checks. This change is due to a policy allowing for the garnishment of benefits for individuals who have defaulted on student loans.
Resumption of Student Loan Collections
On April 21, the Trump administration announced the return of student loan collection efforts by the U.S. Department of Education. This marks a shift after nearly five years of paused collections related to the COVID-19 pandemic. Currently, over 450,000 federal student loan borrowers aged 62 and older are in default and are likely receiving Social Security benefits, according to the Consumer Financial Protection Bureau.
Social Security payments vary for beneficiaries based on their birth date, potentially arriving on June 3, 11, 18, or 25. Many individuals rely on these benefits for their primary income, so the thought of a reduced payment due to garnishment can induce significant stress.
Understanding Garnishment Notifications
Federal student loan borrowers should receive a minimum of 30 days’ notice before their Social Security checks are offset due to loan defaults. This notification contains essential information for disputing the garnishment, so it’s crucial for borrowers to ensure their loan servicers have up-to-date contact information.
If you can demonstrate financial hardship or have a pending loan discharge, you may be able to contest the offset. Seeking a discharge through your loan servicer is a potential course of action, especially if you face serious health issues.
Options for Loan Discharge
Borrowers with disabilities may qualify for a Total & Permanent Disability (TPD) discharge if their condition significantly hinders their ability to work. Documentation of this disability can be provided by healthcare professionals, the Social Security Administration, or the Department of Veterans Affairs.
Getting Back on Track with Your Loans
Another way to stop the garnishment of Social Security benefits is by getting your loans back in good standing. Contact the Default Resolution Group to explore different options, such as enrolling in an income-driven repayment plan. For those whose only income comes from Social Security, payments under these plans might be minimal or even zero.
Limits on Garnishment
When Social Security benefits are garnished, up to 15% of an individual’s monthly payment may be taken to cover defaulted student loans. However, beneficiaries must retain at least $750 each month. This cap applies to all types of benefits, including retirement and disability payments. The garnishment is calculated based on the total benefit amount before any deductions like Medicare premiums.
Coping with Limited Income
Many retirees express concern about managing their expenses with a fixed income, especially when facing garnishments. Exploring alternative sources of relief may help stretch limited funds.
Numerous charitable organizations offer assistance to seniors facing healthcare costs. For example, Copays.org provides resources for covering copayments, deductibles, and medications. The National Patient Advocate Foundation maintains a directory for finding local financial assistance for various healthcare needs.
It’s also important for older adults to utilize available food aid. A study from 2015 indicated that less than half of eligible seniors participated in the Supplemental Nutrition Assistance Program (SNAP). This program can provide substantial monthly benefits—up to $292 for individuals—usable at grocery stores and farmers markets.
By being proactive and leveraging available resources, individuals can better manage their finances in light of the recent changes to Social Security benefits.
