Social Security Checks Could Shrink For 450,000 Retirees As Government Resumes Seizing Benefits Over Student Loan Defaults

The U.S. Department of Education has resumed involuntary collections on defaulted student loans, ending a five-year pause that began during the COVID-19 pandemic. As of May 5, federal agencies can once again seize income from defaulted borrowers, including garnishing wages, intercepting tax refunds, and taking a portion of Social Security benefits.

The change could directly impact around 452,000 Americans age 62 and older, according to the Consumer Financial Protection Bureau. Many of these retirees could see their monthly Social Security checks reduced significantly, in some cases down to just $750, Forbes reports.

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From $1,883 to $750: A Sharp Drop in Protected Income

Under a policy proposed during the Biden administration, borrowers receiving Social Security benefits would have been able to shield up to 150% of the federal poverty line — about $1,883 per month — from student loan garnishment. That protection was never implemented.

Instead, the current policy reverts to a decades-old rule from 1996, which only protects the first $750 of a retiree's monthly Social Security income. Anything above that can be garnished, up to 15% of the total benefit, experts told CNBC. The $750 floor has not been adjusted for inflation, meaning it now falls well below the federal poverty line.

Why $750 No Longer Covers the Basics

Back in 1996, $750 was considered a modest but livable amount for a single retiree. Today, it's about $400 below the monthly poverty line of roughly $1,255. For perspective, even the federal Supplemental Security Income benefit — designed to support low-income seniors — currently pays up to $967 per month.

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Had the exemption amount kept pace with inflation, it would be closer to $1,450 today, according to Forbes. Instead, retirees whose benefits are garnished may now be left with less money than what's required to cover basic needs like rent, groceries, or prescription medications.

How the Policy Shift Happened

The Biden administration attempted to increase protections for older borrowers, according to the National Association of Student Financial Aid Admissions. In the final months of his term, Under Secretary of Education James Kvaal proposed raising the garnishment floor to $1,883, with annual inflation adjustments. That change would have significantly reduced or eliminated garnishments for most affected retirees.

However, the Trump administration did not adopt the proposal. Instead, it reinstated the 1996-era garnishment policy. According to the U.S. Department of Education, this move is in line with requirements under the Higher Education Act of 1965 and was made alongside a broader restart of collections on all defaulted loans.

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Lawmakers Call for Reform

As benefit offsets resume, lawmakers and consumer advocates are pushing for legislative changes. Rep. Ayanna Pressley (D-MA) and Sen. Cory Booker (D-NJ) have introduced a bill to halt Social Security garnishment for student loan debt. Pressley called the policy "shameful," saying that no one should have their retirement benefits seized to repay old student loans.

Whether the bill gains traction remains uncertain. For now, retirees in default are urged to explore options like income-driven repayment or loan rehabilitation to avoid benefit garnishment. The Federal Student Aid office has expanded support and extended call center hours to assist affected borrowers.

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