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Social Security payments could be cut over student loan default

Seniors who default on their student loans could see benefits garnished. But there are ways to save.

As millions of student borrowers prepare to make their first student loan payments in three years, some of those who’ve been making payments for decades may take a hit to their retirement benefits. 

Under current law, seniors can have their Social Security benefits garnished to repay student loans in default. Social Security beneficiaries could lose 15% of their monthly benefits, according to a post from the Legal Aid Society of Cleveland. However, these benefits can’t be reduced below $750 a month or $9,000 a year. And Supplemental Security Income (SSI) can’t be offset to repay student loans in default, the LASCLEV said.

Currently, about 6.2% of federal student loan borrowers are age 62 or older and the average borrower in this cohort owes $41,780 in federal educational debt, including Parent PLUS loans, according to research from

Additionally, Social Security recipients who are in default on student loans could be at risk of having about $2,300 in benefits garnished, according to an analysis by the Center for Retirement Research at Boston College. 

Social Security benefit withholding could be set off after a student loan has been delinquent for 425 days and the borrower fails to restart payments following notification from the Department of Education, according to the Center. But the Education Department has launched a temporary on-ramp program that could prevent borrowers from going into default at least until next year. 

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The Education Department announced an "on-ramp" program running from Oct. 1 to Sept. 30, 2024. According to a statement from the White House, "Financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default or referred to debt collection agencies." 

However, interest would continue to accrue during the passing of this temporary program.

"On-ramp" is part of President Joe Biden’s initiative to expand student debt relief. That includes the new Saving on A Valuable Education (SAVE) income-driven repayment (IDR) plan. So far, more than 44 million borrowers have enrolled in this program which could lower monthly payments to zero. 

Under its rules, single borrowers enrolled in SAVE who earn $32,800 or less or a family of four earning $67,500 or less (amounts are higher in Alaska and Hawaii) won’t owe loan payments, StudentAid.Gov said. Borrowers with incomes above these limits could save at least $1,000 a year compared to other IDR plans.

"The Department of Education finalized our new income-driven repayment (IDR) plan, which would be the most affordable repayment plan in our country's history," Secretary of Education Miguel Cardona said in a live press webinar.

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U.S. Representatives Raúl M. Grijalva (D-Ariz.) and John B. Larson (D-Conn.) has reintroduced the Protection of Social Security Benefits Restoration Act. This piece of legislation aims to restore federal protections that could prevent Social Security benefits from being garnished to repay federal student loans and other types of non-tax debt. 

"Seniors paid their entire lives into Social Security and are being punished largely due to the skyrocketing cost of higher education," Grijalva said. "For many, Social Security benefits are the only source of income they can depend on and it’s time we restore that certainty for seniors. With student loan debt payments resuming in October, it’s critical that we act now to protect the benefits seniors need to retire and live their lives with dignity."

At least 114,000 Americans have had their Social Security benefits garnished due to student loan default, according to a 2016 report from the Government Accountability Office. 

"It’s past time Congress protects seniors and the Social Security benefits they have earned with every paycheck," Senator Ron Wyden (D-Oreg.) said in a statement. "That’s why I’m proud to reintroduce legislation that shores up protections for Social Security benefits and allows seniors to retire with the dignity they deserve."

This announcement follows the Supreme Court decision to strike down Biden’s widespread student loan forgiveness plan that would have wiped out up to $20,000 in student loan debt for borrowers who meet certain income parameters. 

But SCOTUS ultimately ruled the president would have been overstepping his powers. The court also ruled that Biden would have unjustly used the text of the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 – a law that allows the Education Department to waive certain barriers to student loan forgiveness in times of national emergencies such as the COVID-19 pandemic. 

Nonetheless, the president announced his administration's plans to continue pursuing widespread student loan relief through the Higher Education Act of 1965, which permits the Education Department to "compromise, waive or release loans."

If you’re having trouble saving for retirement, you could consider taking out a personal loan to pay down high-interest debt which could help you reduce your monthly payments. Visit Credible to speak to a loan expert and get your questions answered. 


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