Why Social Security checks could shrink this month for nearly 200,000 Americans

Some Social Security beneficiaries could find themselves penny pinching this month when their Social Security check hits their bank account this week.

Yes, payments could be garnished and that’s because beneficiaries in default on their federal student loans are now at risk of seeing their monthly payments lessened due to the Education Department’s continued effort to collect late payments.

Last month, the Treasury Department started issuing 30-day notices to an estimated 195,000 Social Security beneficiaries, warning them that they are in default on the student loans and are subject to garnishments through the Treasury Offset Program.

The program allows for the Treasury Department to collect debts through the garnishments of wages and other benefits like Social Security payments, tax refunds and more.

Additionally, by the end of summer, the department estimates that 5.3 million defaulted borrowers will receive a notice from the Treasury regarding garnishments.

Student loans are considered in default after they have not been paid for 270 days or more.

Defaulting on a student loan could also negatively impact your credit score or could lead to asset seizures.

The garnishments are especially 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 collections are making their way back 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. But the collections can continue as planned.

If you can recall, the collections were paused back in March 2020 when the COVID-19 pandemic first began. It was extended by former President Joe Biden’s administration.

The first round of June’s Social Security payments are to be sent out on June 3, while the rest of the payments will be issued on June 11, 18 and 25. Keep in mind that federal law protects $750 a month in Social Security benefits from being garnished, but the amount is still well below the federal poverty line.

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.