Navigating Student Loan Default: How Social Security Benefits Are Affected

If you’re one of the millions of older Americans relying on Social Security to cover your bills, brace yourself. A significant financial challenge is now emerging for those with outstanding student debt.

The Return of Student Loan Collections

After five years of pandemic-related relief, the Department of Education announced on May 5, 2025, that collections on defaulted student loans are officially resuming[1]. This development has serious implications, particularly for retirees who depend on Social Security as their primary source of income.

Beginning in June 2025, Social Security recipients who have defaulted on federal student loans will see their monthly benefits reduced by up to 15%[2]. For someone receiving $1,500 monthly in benefits, this could mean losing $225 each month—a substantial amount that could disrupt financial stability for many seniors.

As 73-year-old Mary Glod explained, “When you’re only getting a thousand dollars a month, and you’ve got rent and you’ve got utilities, I just can’t pay that much.”[1] Like many others, Glod fears her loans will go into default, triggering these automatic deductions.

Who Stands to Be Affected

The scope of this issue is extensive. According to recent data:

• Over 100,000 Americans age 62 or older are currently in default on federal student loans[2]
• An estimated 452,000 borrowers ages 62 and older with defaulted loans are likely receiving Social Security benefits[4]
• Between 2001 and 2019, the number of borrowers facing forced collection of their Social Security benefits increased from 6,200 to 192,300—a staggering 3,000 percent increase[4]

Federal student loans typically enter default after 270 days of missed payments[1][4]. Once in default, borrowers not only face benefit garnishment but also lose eligibility for federal student aid and cannot change repayment plans or request deferments[4].

Understanding the Protection Threshold

While the government can withhold up to 15% of your benefits, there is some protection built into the system. The law establishes a protected threshold of $750 per month, meaning your benefits cannot be reduced below this amount[2]. However, even a smaller deduction can significantly impact those living on fixed incomes.

Steps to Protect Your Benefits

If you’re at risk of having your Social Security benefits garnished, several options are available:

Explore Repayment Alternatives

The Department of Education offers multiple pathways to avoid or stop garnishments:

• Rehabilitation agreements: Making a series of affordable monthly payments to bring your loan back into good standing
• Income-driven repayment plans: Adjusting your payment amount based on your income
• Fresh Start initiative: A temporary program that removes borrowers from default status[2][3]

Act Quickly

All defaulted borrowers will receive email communications from the Federal Student Aid office urging them to contact the Default Resolution Group[3]. Responding promptly to these notices and exploring your options can help you avoid involuntary collections.

Consider Requesting a Hearing

If you believe the offset would cause financial hardship, requesting a hearing to reduce or stop the offset might be an option. Demonstrating circumstances such as health issues or dependent support could potentially reduce the garnishment amount.

Looking Ahead: Preparation for Future Retirees

For those approaching retirement with outstanding student loans, taking proactive steps now can prevent future financial stress:

• Ensure your loans remain in good standing
• Consider consolidating multiple loans
• Explore income-driven repayment options that might lower your monthly obligation
• If possible, prioritize resolving student debt before retirement

The Broader Impact

The resumption of these collections raises important questions about the intersection of federal student debt and retirement security. As the number of older Americans with student debt continues to grow, policies affecting this intersection will become increasingly significant.

The Department of Education has stated it is committed to providing clear information about payment options and will conduct a robust communications campaign over the next two months to engage borrowers and remind them of their obligations[3].

By understanding your rights and options, you can navigate this complex situation more effectively and take steps to protect your financial well-being during retirement.