The Trump administration has announced it will resume collection efforts on defaulted federal student loans starting in early May—and it could mean lower Social Security payments for some borrowers.
Why It Matters
The resumption of loan payments, which were paused during the coronavirus pandemic, will impact more than 5 million borrowers who are currently in default, the Education Department said. Only 38 percent of borrowers are in repayment and up to speed with repayments of their student loans.
What To Know
Since March 2020, defaulted student loans haven’t been collected due to administrative forbearance triggered by the pandemic. While the requirement to restart payments began in October 2024, some borrowers are still behind on their debt.
Borrowers are considered delinquent after one missed payment, and loans are considered in default in most cases after 270 days of nonpayment. Now, the Education Department has announced that if borrowers do not set up a payment plan by May 5, they may face garnishment from their wages, Social Security benefits and tax refunds to recover outstanding balances.
When contacted by Newsweek, the Education Department referred to the Federal Student Aid website which confirms garnishment practices will apply to Social Security benefits.
Stock image/file photo: A Social Security card with U.S. Dollars. Stock image/file photo: A Social Security card with U.S. Dollars. GETTY
How Does The Debt Recovery Work?
Through a process known as Treasury Offset Program (TOP), the federal government can offset up to 15 percent of Social Security benefits to repay defaulted federal student loans.
“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 explains. “The notice may only be sent once, and offsets will continue until your debt is paid or the default status is resolved.”
For an average monthly retirement benefit of $1,931.20, that would result in a decrease of $289.62, down to $1,641.52 per month. Garnishment practices cannot reduce your monthly benefit to lower than $750.
Spousal and survivor benefits could also be targeted if the recipient is behind on their payments. However, Supplemental Security Income (SSI) benefits are not subject to such measures.
According to Investopedia, in 2024, there were some 2.4 million adults aged 62—the earliest age at which retirement benefits can be collected—and older who still had outstanding student loan debt, totaling $10.77 billion in unpaid federal education loans. Not all of these payments will have delinquent or defaulted status, however, and not everyone begins collecting Social Security at the same age.
What People Are Saying
Education Secretary Linda McMahon said in a piece for the Wall Street Journal: “If you are a student borrower with a federal loan balance and haven’t been making payments, you must restart payments now.”
Student Borrower Protection Center (SBPC) executive director Mike Pierce said in a statement: “For five million people in default, federal law gives borrowers a way out of default and the right to make loan payments they can afford. Since February, Donald Trump and Linda McMahon have blocked these borrowers’ path out of default and are now feeding them into the maw of the government debt collection machine. This is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country.”
What Happens Next
The Education Department’s Office of Federal Student Aid will email all borrowers currently in default over the next two weeks. Later this summer, it will begin sending notices to initiate wage and benefit garnishment for those who remain in default.
