The federal government is preparing to resume Social Security garnishments for Americans in default on their student loans, a policy change that could result in up to 15 percent of monthly benefits being withheld. This action will affect roughly 452,000 beneficiaries, including retired workers and individuals with disabilities, and is projected to take effect later this summer.
According to Newsweek, many of those impacted hold long-standing debts, often from loans taken decades ago. The upcoming measure follows a temporary pause in collections by the Department of Education and is part of broader efforts to recover overdue federal student loan payments.
Who Will Be Affected
The Department of Education (DOE) confirmed that the garnishments will largely impact borrowers with Parent PLUS loans taken decades ago.
These are mostly Parent PLUS loans from decades ago. Think about 70 year olds who co-signed for their kids’ education in the 1990s and got buried by compound interest – said Michael Ryan, finance expert and founder of MichaelRyanMoney.com.
It’s a family wealth transfer in reverse. Instead of leaving something behind, these seniors are having their final safety net shredded for loans they probably forgot they even had.
Ryan also advised,
Check their credit reports now. If there’s federal student debt lurking, you’ve got maybe 30 days to figure out consolidation options before the garnishments hit.
Policy Background and Timeline
In early June, the DOE paused garnishments for certain federal benefit recipients, including Social Security beneficiaries, but this delay will soon end. The department stated:
If you receive monthly federal benefit payments, such as Social Security benefit payments, and Railroad and Office of Personnel Management retirement benefits you may have received a letter from the Department of Treasury that listed a date when offsets to your payments was scheduled to begin.
Please be aware that the Department of Education is delaying offsets of these monthly benefits for a couple of months and plans to resume sometime this summer.
Kevin Thompson, CEO of 9i Capital Group, said:
These garnishments target individuals in default on their student loans who are currently receiving Social Security benefits. The exact timeline for the nearly 452,000 delinquent borrowers hasn’t been set, but one thing is certain — the current administration intends to collect.
Financial Implications
For retirees who depend solely on Social Security, the garnishment could have a severe impact. Combined with taxes, the loss is significant. Thompson explained:
If you’re in the 22 percent bracket and have a 15 percent garnishment for delinquency, you’re effectively losing about 26 percent of your benefits to taxes and repayments.
This is particularly concerning given that in 2023, Social Security benefits lifted 22 million Americans out of poverty, according to the Center on Budget and Policy Priorities.
Wider Debt Context Among Seniors
The United States holds about $1.75 trillion in student loan debt. The number of borrowers aged 62 and older rose from 1.7 million in 2017 to 2.7 million in 2023 — an increase of 59 percent, according to the Consumer Financial Protection Bureau. Many of these debts stem from loans taken to help children or grandchildren attend college.
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, noted:
Much in the same way that a few million borrowers who are in delinquency over student debt and could face their paychecks being garnished, those receiving Social Security benefits could find themselves in the same situation if they haven’t been making payments.
On July 24, a separate garnishment policy affected roughly 1 million beneficiaries who had received overpayments from the Social Security Administration. In those cases, 50 percent of monthly benefits were withheld until the overpayment was repaid — a stark increase from the 10 percent rate applied under the Biden administration.
