June Social Security Checks Could Drop Sharply Due To Student Loan Garnishments — Experts Share Ways To Get Relief

Retirees who have defaulted on their student loans may see a reduction in their Social Security checks from June. This is a result of the U.S. Department of Education’s decision to recommence involuntary collections on defaulted student loans, including garnishing wages, intercepting tax refunds and seizing a portion of Social Security benefits.

What Happened: The U.S. Department of Education is set to recommence collection activity on the nation’s $1.6 trillion student loan portfolio, after a nearly five-year pause due to Covid-era policies. According to the CNBC report, the garnishments will start in June and the affected retirees may receive reduced Social Security checks from this month onwards.

As per Forbes, several retirees could see their monthly Social Security checks reduced significantly, in some cases down to just $750. However, the actual reduction will depend on factors such as the recipient’s birth date and when they began receiving benefits.

However, according to Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, borrowers have options to halt these payment offsets.

Higher education expert Mark Kantrowitz states that federal student loan borrowers should have been given at least 30 days' notice before their Social Security benefits were offset. He notes that borrowers can avoid or halt the offset by proving financial hardship or having a pending loan discharge.

Meanwhile, Betsy Mayotte, president of The Institute of Student Loan Advisors, suggests that opting for an income-driven repayment plan could be a way out. Borrowers with severe, permanent mental or physical disabilities that prevent them from working may qualify for a Total and Permanent Disability (TPD) discharge, using proof from a doctor, the SSA, or the VA, suggest experts.

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Why It Matters: The resumption of involuntary collections on defaulted student loans is part of a broader trend of financial challenges facing retirees. The Consumer Financial Protection Bureau estimates that over 450,000 federal student loan borrowers aged 62 and older may be impacted by this change.

Furthermore, the resumption of student loan payments has had a significant impact on borrowers, with some seeing steep drops in their credit scores. This has created additional financial strain for retirees who are already facing the prospect of reduced Social Security benefits.

As retirees navigate these financial challenges, it’s important for them to explore all available resources, including charitable organizations that assist with health-care costs and food assistance programs. Additionally, retirees facing garnishments on their Social Security benefits may be able to prevent or stop the offset by proving a financial hardship or pursuing a discharge with their student loan servicer.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.