Many retirees depend on every dollar of their Social Security benefits, so even a small reduction can be disruptive. Beginning in June, more than 450,000 seniors might face unexpected cuts to their monthly payments.
The reason? Unpaid student loan debt that is now in default. If you're trying to crush your debt before or during retirement, now is the time to take action.
Earn cash back on everyday purchases with this rare account
Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!1 <p>See website for details.</p>
With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!
This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.
Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.
Apply for a Discover Cashback Checking account today
Why might checks be smaller?
Social Security checks can be garnished when federal student loans go unpaid. If a borrower defaults, the government can use the Treasury Offset Program (TOP) to recover the debt by withholding a portion of federal benefits.
This includes reducing Social Security payments, which many retirees rely on to cover essentials. After a multi-year pandemic pause, these offsets are restarting and could impact checks as early as this June.
How many people might be impacted?
A loan goes into default when the delinquency becomes 270 days past due.
According to recent reports, more than 450,000 older borrowers are in default and potentially at risk of losing part of their benefits. These seniors were protected from garnishment during the pandemic-era pause, but that protection ended in May.
With enforcement ramping back up, a large number of retirees could soon be caught off guard.
How much of their benefit could they lose?
The government can legally withhold up to 15% of a person's monthly Social Security benefit if they are in default on a federal student loan. However, it cannot reduce payments below $750 per month.
For retirees already living on a tight budget, even a 15% cut can be substantial. It may create financial strain for those counting on every penny.
If you’re over 50, take advantage of massive discounts and financial resources
Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.
How to become a member today:
- Go here, select your free gift, and click “Join Today”
- Create your account (important!) by answering a few simple questions
- Start enjoying your discounts and perks!
You’ll also get insider info on social security, job listings, caregiving, and retirement planning. And you’ll get access to AARP’s Fraud Watch Network to help you protect your money, as well as tools to help you plan for retirement.
Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $15 the first year with auto-renewal.
Is this a new policy?
No, this is not a new policy. The federal government has long had the ability to garnish Social Security benefits for unpaid student loans.
However, those garnishments were paused during the COVID-19 pandemic. That pause remained in effect through several policy extensions.
Now, the government has returned to its pre-pandemic rules and resumed the collection process.
How will I know if I might be impacted?
Before reducing your benefits, the government is required to notify you in writing.
You'll receive a letter detailing the offset, indicating what portion of your benefit will be withheld, and that both the offset and negative credit reporting will begin in 65 days.
If you've received such a letter or know you're in default, it's critical to act quickly.
What can I do if I owe money?
If you're in default on a federal student loan, contact your loan servicer or the Department of Education. You may be eligible to apply for a period of deferment or forbearance. Or, you might be able to craft a flexible repayment plan that fits your budget.
Taking action now can stop garnishments and even restore access to full benefits in the future. The longer you wait, the harder it may become to protect your Social Security income.
Retirement News: Almost 80% of Americans fear a retirement age increase — here’s the real reason why
Bottom line
If you're one of the hundreds of thousands of seniors who has defaulted on a student loan, your June Social Security check might be smaller than expected.
While the government can't reduce payments below $750, losing a portion of your benefit can significantly impact your financial stability.
If you're a senior who has student loan debt, this is a good time to review your loan status and take steps to avoid unnecessary financial surprises. Doing so can preserve your income and promote a more stress-free retirement.
More from FinanceBuzz:
- 7 things to do if you’re barely scraping by financially.
- Find out if you're overpaying for car insurance in just a few clicks.
- Make these 7 savvy moves when you have $1,000 in the bank.
- 14 benefits seniors are entitled to but often forget to claim
2025 award winner Best Online Checking Account