Earthquake at Social Security: The benefits of almost half a million people are at risk
Millions of Americans who rely on Social Security could see some of their monthly benefits confiscated beginning in June if they do not pay their student loan debt, Newsweek reported.
Approximately 2.9 million Americans aged 62 and older have federal student loan debt, a figure that has increased by more than 70% since 2017, according to the U.S. Department of Education.
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According to CNBC, more than 450,000 senior borrowers are currently in default and could be subject to benefit cuts.
The Trump administration has resumed aggressive collection measures that were suspended during the Covid-19 pandemic.
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Through a process known as the Treasury Offset Program (TOP), the federal government can offset up to 15% of Social Security benefits to pay off defaulted federal student loans, but they cannot reduce your monthly check to less than $750 dollars.
“Before offset begins, a notice of intent to offset will be sent to your last known address to inform you that offset and negative credit reporting are scheduled to begin in 65 days,” explains the Federal Student Aid website. “The notice can only be sent once and offsets will continue until your debt is paid or the default is resolved.”
As of May 5, the White House resumed these Treasury offsets for delinquent borrowers, including the automatic garnishment of Social Security payments.
A common use for decades
It’s worth noting that these debt collection practices are not new and have been used for more than two decades, Tom O’Hare, a holistic college counselor at Get College Going, told Newsweek.
“They were suspended to help delinquent borrowers during Covid-19 and during the remainder of the previous administration,” O’Hare said.
A spokesperson for the Department of Education told CNBC that borrowers may not receive new notifications if they had already been warned before the pandemic: “Notification may only be sent once, and borrowers may have received it prior to Covid-19.”
O’Hare added that: “A borrower who has not paid their federal student loan is considered in default when the loan delinquency reaches 270 days.
“The loan is generally reassigned from loan servicers to a collection agency that works on behalf of the federal government to litigate or implement rigorous recovery practices, including wage garnishment and deductions from Social Security payments,” it added.
Collections resumed on May 5 and seizures could begin to affect June benefit payments. The Education Department has not indicated whether it will review the process or issue a new round of warnings.