The U.S. Department of Education has put a halt to its plans of reducing Social Security benefits for individuals who have been unable to pay their student loans, as per a department spokesperson.
What Happened: The U.S. Department of Education has put a hold on its plan to deduct Social Security benefits from those who have defaulted on their student loans, CNBC reported. Education Department spokesperson, Ellen Keast, confirmed the decision.
Meanwhile, Keast told The Hill, "In the coming weeks, the Department will begin proactive outreach to recipients about affordable loan repayment options and help them back into good standing.”
The Trump administration, which had previously announced the resumption of collection activities on the $1.6 trillion student loan portfolio, has now reversed its policy. The government had refrained from pursuing individuals who had fallen behind on payments for nearly five years due to COVID-19-related policies.
This policy change would bring relief to Social Security recipients, many of whom live on a fixed income and faced reductions of up to 15% in their benefits to repay defaulted student loans.
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Why It Matters: This decision comes just a day after experts warned that June Social Security checks could see a significant drop for retirees who have defaulted on their student loans. The U.S. Department of Education’s decision to restart involuntary collections on defaulted student loans, including garnishing wages, intercepting tax refunds and seizing a portion of Social Security benefits, was expected to impact retirees from June onwards.
Earlier in May, it was reported that the U.S. Department of Education’s decision to resume involuntary collections on defaulted student loans could directly affect around 452,000 Americans aged 62 and older. Many of these retirees could see their monthly Social Security checks significantly reduced, in some cases down to just $750.
The administration's move to pause these deductions provides these older borrowers additional time to get current on their payments and avoid future reductions in their benefit checks.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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