Social Security: Defaulted Student Loans Can Lead to Benefit Garnishments — How To Avoid It

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Social Security beneficiaries who are in default on federal student loans could have their monthly payments garnished to pay the debt down. To avoid this financial hit, there are steps you can take to get the loan out of default.

More than 2.6 million Americans who are 62 and older owed a combined $107.3 billion in federal student loan debt at the end of 2022, Fox Business reported, citing U.S. Department of Education data. A relatively small percentage have loans in default. Those who do could have up to 15% of their Social Security benefits garnished, though the agency can’t reduce benefits to less than $750 a month or $9,000 a year, as GOBankingRates recently reported.

Before the garnishment begins, Social Security will send a notice, according to the Legal Aid Society of Cleveland. Debtors can’t appeal, challenge, change or question this debt, meaning the only way to avoid it is to get the loan out of default. Among the ways to do this are to consolidate the loan or set up a rehabilitation program.

Borrowers who received Direct Loans or FFEL Program Loans and qualify for rehabilitation must meet the following requirements, according to

  • Agree in writing to make nine voluntary, reasonable, and affordable monthly payments (as determined by your loan holder) within 20 days of the due date.
  • Make all nine payments during a period of 10 consecutive months.
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To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either agree to repay the new Direct Consolidation Loan under an Income-Driven Repayment plan or make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.

Social Security benefits can be garnished for a number of reasons. In addition to defaulted student loans, these include overdue federal taxes as well as child support, alimony or restitution.

State laws determine a valid garnishment order for child support, alimony and restitution, according to the Social Security Administration. You can’t appeal to the agency to challenge this kind of garnishment. For that, you’ll need to contact an attorney or representative in the jurisdiction where the court issued the order. To appeal a tax garnishment, you will need to contact the IRS at 800-829-7650 to discuss your appeal rights.

The Department of the Treasury can also withhold Social Security benefits to collect delinquent non-tax debts owed to other federal agencies. There is no appeal available under the Social Security Act, so if you find yourself in this situation you can contact Treasury staff at 800-304-3107.

If there are any changes to your garnishment order, you should go to your local Social Security office with a new court order that changes the garnishment of your benefits.

Your Social Security benefits are not subject to garnishment when it comes to private debt such as medical costs, car loans and credit card bills.

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