Chris Clark
5 min read
For millions of older Americans relying on an embattled Social Security system to cover their bills, another financial gut punch may be on the way — and it’s coming from their own student debt.
Under a Trump administration move to resume collections on federal student loans, borrowers in default could soon see their Social Security benefits docked by as much as 15%, higher education expert Mark Kantrowitz told CNBC.
-
Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
-
I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast)
-
Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10)
That means retirees already living on fixed incomes could lose a big chunk of their monthly checks with little warning.
And for the hundreds of thousands of borrowers 62 and older who have defaulted student loans — it could be an unhappy surprise in the mail.
The government has long had the power to claw back a portion of Social Security benefits to repay defaulted federal student loans. But those collections were paused during the COVID-19 pandemic. The pause was extended under the Biden administration, but President Trump has restarted the clock.
The Department of Education recently announced the administration will resume involuntary collections as early as June, meaning borrowers in default could once again be subject to wage garnishments, tax refund seizures and offsets to Social Security checks.
And there’s a big population at risk. Recent federal data shows that nearly 3 million people over the age of 62 hold federal student loans. The Consumer Financial Protection Bureau says more than 450,000 borrowers in that age group have defaulted on their federal student loans while receiving Social Security benefits.
Many of these borrowers are parents who co-signed loans or took out Parent PLUS loans for their children and fell behind after job losses, medical expenses or other financial shocks, according to the National Consumer Law Center.
“Borrowers who receive these notices should not panic,” Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program, told CNBC. “They should reach out for help as soon as possible.”
Read more: This is how American car dealers use the '4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
