The U.S. Department of Education has decided not to pursue garnishment of Social Security benefits for borrowers with defaulted federal student loans, reversing an earlier announcement that collections would resume in full. This is according to reporting from CNBC this morning.

The move comes just days before the agency begins seizing wages and tax refunds from borrowers who have not resolved their default status.

The shift offers relief to hundreds of thousands of older Americans who rely on Social Security for basic living expenses. While the administration has resumed most forms of debt collection following a five-year pause, it is holding off on cutting retirement and disability benefits, at least for now.

“The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income“, Education Department spokesperson Ellen Keast told CNBC.

The comments signal a departure from the department’s initial April 21 decision to resume full-scale collections.

Who Could Have Been Impacted 

Roughly 5 million Americans are in default on their federal student loans. Of those, more than 450,000 are age 62 or older and likely receive Social Security benefits. Under federal law, the government can withhold up to 15% of a borrower’s monthly benefit to repay defaulted loans.

The practice has drawn renewed scrutiny in the lead-up to the resumption of collections. Student loan expert Mark Kantrowitz has called garnishing Social Security retirement and disability benefit payments a morally bankrupt policy.

While the Education Department’s announcement shields retirees from garnishment for now, it does not eliminate the risk. The department has not released an official statement or publication clarifying how long the pause will last, or whether the decision may change later this year.

Collection Activity On Student Loans Resumes For Others

The federal government will begin collecting from borrowers in default through other methods, including wage garnishment and tax refund offsets. The Department of Education launched a nationwide outreach campaign to help borrowers avoid those penalties.

The collection tools available to the government are extensive. In addition to garnishing wages, the government can seize tax refunds, block access to FHA and VA mortgages, revoke professional licenses, and report defaults to credit agencies. 

Borrowers who are at risk are encouraged to explore options such as loan rehabilitation or consolidation, both of which can remove a loan from default and stop collection efforts. 

Failing to act could result in a cascade of financial penalties, including fees that slow repayment progress and long-term damage to credit scores.

What Borrowers Should Do Now

Although Social Security recipients are protected for now, many borrowers remain vulnerable. The Department estimates that up to 10 million people could be in default by this summer if steps aren’t taken to get back on track.

The Education Department has not specified what criteria it used to exempt Social Security benefits from garnishment. It also has not announced whether the exemption will apply to both retirement and disability payments.

Borrowers who are unsure of their status can log in to their account at StudentAid.gov to check for any default notices or past-due balances. Those already in default can stop future tax refund offsets and other collection activity by taking action and getting out of default.

For now, the suspension gives time for vulnerable borrowers to seek help and avoid garnishment by entering repayment agreements or applying for available consolidation or discharge programs.

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