Default on Federal Student Loans and the Government Can Take Up to 15% of Your Social Security Check
Carrying federal student loan debt into retirement can put more at risk than just your credit score, and many older borrowers have no idea how far the government's reach can extend into their monthly income.
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Student loan debt is not just a problem for young adults. Millions of older Americans end up carrying educational debt into retirement, and in many cases, the balance isn’t from their own college years.
Parents can take out federal loans to help pay for a child’s education, while grandparents and other older relatives may take on debt to support family members through school. Some borrowers may also go to college later in life to support a career change.
That can create a particularly difficult situation for retirees who rely heavily on Social Security for income. A debt that seemed manageable while working can become much harder to handle on a Social Security check alone, or even when there’s other income, like savings, to supplement those benefits.
But for senior borrowers who have federal student loans, falling seriously behind can eventually have consequences beyond collection calls and growing balances. It could also lead to smaller Social Security checks.
Your Social Security checks could be garnished if you stop paying
If you owe money in the form of federal student loans and you default on those loans, the government can generally withhold up to 15% of your Social Security through the Treasury Offset Program.
That does not mean every senior with student loan debt automatically loses 15% of their Social Security check. The loan must be in default, and the government must follow applicable collection procedures.
Still, Social Security garnishment is a real risk for federal student loan borrowers who are struggling to keep up with their payments. Losing even a portion of a monthly Social Security benefit can make it harder to cover recurring expenses for people without other sources of income.
Don’t ignore the problem
If you’re struggling to keep up with federal student loan payments, the worst option is to ignore the issue. Instead, contact your loan servicer as soon as possible and explain that you cannot afford your current payments. Depending on your circumstances, you may have options that can make them more manageable.
You may, for example, be eligible for an income-driven repayment plan that results in you owing less money each month. That could make it easier to stay current on your loan. It’s best to check with your loan servicer to see what options you have.
If your loans are already in default, there may be steps you can take to get current. You could look at loan rehabilitation or other options.
That said, be cautious about companies that promise to eliminate student debt for an upfront fee. You can explore your options directly through official government resources or your loan servicer without paying a private company simply to access federal programs.
Finally, do recognize that Social Security garnishment only applies to federal student loans. If you took out private loans, there can be consequences associated with falling behind on your payments. But your benefits themselves cannot be garnished for a private loan default.
All told, falling behind on federal student debt is something you should try to avoid. But if you’re a senior, it’s important to understand the consequences if you need your Social Security checks in full to make ends meet.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and CNN Underscored.
