A group of Social Security beneficiaries may notice their June payment has been garnished when it arrives in their bank account this week. Beneficiaries in default on their federal student loans are now at risk of seeing their monthly payments trimmed as the Education Department continues efforts to collect on late payments.
Last month, the Treasury Department began issuing notices to an estimated 195,000 Social Security beneficiaries alerting them that they are in default on the loans and are subject to garnishments through the Treasury Offset Program. That program allows the Treasury Department to collect debts through the garnishment of wages and other benefits like Social Security payments, tax refunds, and more.
The collections are resuming thanks to efforts by President Donald Trump to overhaul the Education Department. Trump has ordered Education Secretary Linda McMahon to dismantle the department, but those efforts were recently blocked by a court ruling. However, the collections can continue as planned.
The collections were paused in March 2020 at the start of the COVID-19 pandemic, and extended by former President Joe Biden’s administration.
The Education Department estimates that by the end of the summer, 5.3 million people will receive notices. Student loans are considered to be in default after they have not been paid for 270 days or more.
On top of the 5.3 million people already in default, an additional 4 million are 91 to 180 days late. Less than 40% of all borrowers are up-to-date on their loan payments.
The first round of June’s Social Security payments are scheduled to go out on June 3. The rest of the payments will be issued on June 11, 18 and 25. Federal law protects $750 a month in Social Security benefits from being garnished, however that number is still well below the federal poverty line.
The start of garnishments is particularly concerning for older Americans whose Social Security benefits are their biggest or only source of income. A report compiled in January by the Consumer Financial Protection Bureau found 452,000 people aged 62 and older are in default on their student loans.
The Education Department advises borrowers struggling to make payments to contact the Default Resolution Group to learn about options that can help. The department says the DRG can assist borrowers in making payments, enrolling in an income-driven repayment (IDR) plan, or signing up for loan rehabilitation.