In a rare bit of good news for older Americans struggling with student loan debt, the U.S. Department of Education is pausing its plan to garnish Social Security benefits from borrowers who have defaulted on their federal student loans, according to a spokesperson for the agency who spoke with CNBC.
This decision comes in the wake of the Trump administration‘s April 21 announcement that it would resume collection activity on the nation’s $1.6 trillion student loan portfolio. For nearly five years, borrowers in default were spared aggressive collection tactics due to Covid-era protections.
The federal government has extraordinary collection powers when it comes to student debt. It can seize tax refunds, garnish wages, and even deduct up to 15% from Social Security retirement and disability checks.
This is especially concerning for the estimated 450,000 federal student loan borrowers aged 62 and older who are in default, according to the Consumer Financial Protection Bureau. Many of these borrowers rely on Social Security as a critical lifeline.
The Education Department’s decision offers a reprieve, giving older borrowers more time to get current on their loans and avoid reduced Social Security checks. While this pause is temporary, it’s a crucial window of relief for those already living on the financial edge.
If you or someone you know is facing default, now is the time to explore options like loan rehabilitation or income-driven repayment plans. This is also a good time to take a closer look at the Social Security system and how it affects people living on a fixed income.
We think a bill we call the Elder Relief Act is the change older Americans need. This legislation would significantly increase financial security for millions of Americans. Learn more here.
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