Department of Education Reverses Course on Social Security Garnishment

In an apparent change of course, the Department of Education said Tuesday that Social Security benefits will not be garnished for student loan borrowers who default.

In a statement to Investopedia, Ellen Keast, a Department of Education spokesperson, said the department had not garnished any benefits issued by the federal government program that provides income to retired and disabled Americans since the resumption of student loan collections. Keast also said the Department has “put a pause” on any future garnishments, confirming a report by CNBC.

“The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income,” Keast said.

A Change In the Education Department’s Original Policy

Not withholding a portion of Social Security payments from beneficiaries who have defaulted on their student loan debt is a shift from the department’s original statement on May 5 about its collections efforts.

Originally, the department said if borrowers failed to bring their accounts into good standing by the summer, it would restart the Treasury Offset Program. Under that program, the government withholds portions of any federal payments, including up to 15% of Social Security. The department had already started garnishing federal tax refunds in mid-May.

This shift could be an effort to align with President Donald Trump’s campaign promise to keep Social Security benefits intact.

Why Does Garnishment on Social Security Matter?

Pausing Social Security payments could help many, as delinquent and defaulted borrowers are getting older on average.

According to data from the Federal Reserve Bank of New York, more than a quarter of borrowers 50 years and older are past due on their loans, likely driven by the rise in Parent PLUS loans, which parents or grandparents are still paying off.

More than 450,000 borrowers have defaulted on student loans and are receiving Social Security benefits, according to estimates by the Consumer Financial Protection Bureau.

Social Security beneficiaries will still be required to pay back their defaulted student loans. Keast told Investopedia that the department would continue to reach out to borrowers about affordable repayment options and work to get them back into good standing.