Can Social Security be Garnished for Student Loans?

Student loans can’t stop you from getting Medicare. But defaulting on federal student debt can lead to your Social Security retirement and disability benefits being garnished.

The Social Security Administration offers four types of benefits: retirement, disability, survivors, and supplemental benefits.

If you default on federal student loans, the government can garnish 15% of Social Security Disability or retirement benefits, but it won’t touch your Supplemental Security Income. SSI can’t be garnished to repay student debt or debt owed to any other creditor.

Healthcare is different. Education debt has no impact on Medicare. Medicare recipients can receive full benefits even if they haven’t paid off their student loans or are in default.

Keep scrolling to learn more about how student loans affect Social Security.

Related: Student Loan Forgiveness for Social Security Recipients

Student loans won’t affect your Social Security so long as you keep your federal loans out of default and in good standing. But even if that happens, your retirement and disability benefits cannot be reduced below $750 a month or $9,000 a year. Supplemental Security Income (SSI) can never be offset to repay student loan debt.

Similarly, your benefit payments are safe if you owe private student loans or are a cosigner. Private lenders can’t garnish any type of Social Security payment. But they can sue you if you fall behind on your bills. If that happens and a court order is entered against you, then the creditor may be able to take money from your bank account and put a lien on your home.

Note: Your bank has to review your account history for two months before getting the garnishment order. If your Social Security benefits have been directly deposited into your account within that two months, the bank must protect the funds up to the total of the direct deposits.

Learn More: Four Steps to Take if You’re Facing a Student Loan Lawsuit

You can owe student loan debt and still collect Social Security benefits. Neither federal nor private student loans can stop you from getting Social Security payments. But falling behind on your federal student loan debt puts you at risk of having some of your Social Security and tax refund taken under the Treasury Offset Program.

Student loans don’t go away when you start drawing Social Security. The government doesn’t automatically write off student loan debt when you retire. You’ll still have to make payments towards your student loan debt until it’s paid in full, forgiven, or discharged at your death.

The federal government offers four income-driven repayment plans to lower your monthly payment based on your income and family size. It could even be $0 if you’re retired, and your only source of income is Social Security.

Learn More: Retiring With Student Loan Debt: Forgiveness & Repayment Options

Social Security is typically not considered income for repaying student loan debt. Each IDR plan excludes Social Security benefits as taxable income if it’s your primary source of money. As a result, many student loan borrowers drawing Social Security have a monthly payment of $0.

However, some recipients have significant income from other sources, like a pension. If that’s your situation, then a portion of your benefits will be considered taxable income. When you complete the annual recertification to stay in an IDR plan, you’ll provide your most recently filed tax return. Your new student loan payment will be based on your adjusted gross income, including the money you get for your retirement and a portion of your Social Security benefits. You can click here to learn more about how Social Security is taxed.

Learn More: Parent PLUS Loan Forgiveness and Repayment Options

The number of consumers age 60 and older with outstanding student loan debt quadrupled from 2005 to 2015, increasing from about 700,000 to 2.8 million. Snapshot of older consumers and student loan debt, Consumer Financial Protection Bureau (CFPB) January 2017 Report

The federal government can garnish up to 15% of Social Security income for federal student loans in default. You default on federal loans if you’re not in deferment or forbearance and miss 270 days of payments.

Your Social Security check can also be garnished to pay a delinquent federal tax debt, child support payments, alimony, and court-ordered victims’ restitution.

Supplement Security Income payments are treated differently. SSI payments cannot be garnished to repay student loans, debts owed to the IRS, government agencies, or debt collectors.

Learn More: How to Stop a Student Loan Garnishment

Since the start of the coronavirus pandemic, the Department of Education has stopped garnishing Social Security benefits for student loan debt and set the interest rate to zero. All collections will resume in May 2022. Contact the Default Resolution Group to find out your options for getting out of default before the freeze ends. A few months back, the Education Department pulled all of its loans from private collection agencies to the DRG for collection.

You can stop a Social Security garnishment by getting your federal student loans out of default. Here are four options to bring your loans back into good standing:

• negotiating a student loan settlement

• applying for loan consolidation

• entering into a loan rehabilitation program

• applying for a total and permanent disability discharge

Bankruptcy may also be an option if you can prove undue hardship.

Learn More: Can You File Student Loan Bankruptcy?

If your personal finances are tight and you’re living near the poverty line, you may be able to lower or stop an offset due to financial hardship. Here are the steps to follow to request a Social Security garnishment hardship:

• Step 1 – Find your defaulted loan. Contact the Default Resolution Group (800-621-3115) to determine if your loan is with the Education Department or a guaranty agency.

• Step 2 – Complete the hardship packet. Ask the debt collector to send you a hardship packet to lower or stop the Social Security Offset. They should ask you to submit a Statement of Financial Status, proof of household income and expenses (living expenses, medical bills, credit card debt, etc.), and a copy of the notification of offset (you can get this from the Treasury Department’s Bureau of the Fiscal Service).

• Step 3 – Wait for a decision. It usually takes about 6-8 weeks to get a decision.

In my experience, it’s usually much easier to lower a benefit offset than it is to get back an income tax refund offset for student loan debt.

Learn More: How to Get Out of Student Loan Default

For many older Americans, the money they get in federal benefits is the only money they get each month. Protecting your Social Security from student loan garnishment is paramount. Over the years, I’ve helped hundreds of Social Security recipients like you get out of default to protect their money.

Schedule a free 10-minute call with me today. We’ll work together to determine the best strategy to deal with defaulted student loans and protect your Social Security money.

UP NEXT: How to Apply for Student Loan Forgiveness