The Federal Government Can Withhold up to 15% of Social Security or Disability Benefits for Student Loan Borrowers in Default
Through a law passed in the mid-1990s, the Treasury Department can work with the Education Department to recoup funds on defaulted federal student loans by withholding borrowers’ Social Security or disability benefits. The law allows up to 15% of the monthly benefits to be withheld, which means an average of roughly $2,500 per year.
Last year, more than 3.5 million Americans 60 and older had outstanding student loan debt – six times the number in 2004, data shows. That debt last year amounted to more than $125 billion, a 19-fold increase from 2004. Over a similar period, the number of Social Security beneficiaries who saw their checks offset because of student loan defaults also surged, from roughly 36,000 in 2002 to 173,000 in 2015, according to a Government Accountability Office report.
A group of Democratic lawmakers, co-led by Sen. Elizabeth Warren of Massachusetts, sent a letter in late March highlighting the devastating impact these offsets have on older Americans who rely on Social Security as their only source of income. These lawmakers want this practice to end.