Efforts underway to prevent government from withholding Social Security benefits due to student loans

A surprising number of seniors face reduced Social Security benefits due to defaulting on student loan payments, prompting lawmakers to demand an end to this practice.

A coalition of Democratic legislators, with Sen. Elizabeth Warren of Massachusetts at the forefront, submitted a letter on Tuesday evening underscoring the damaging consequences these offsets pose for elderly Americans who depend solely on Social Security for income. The letter, exclusively previewed by USA TODAY, urges action.

Individuals in their 60s and older are one of the fastest-growing groups burdened by unresolved student loan debt, with nearly 40% of federal borrowers over the age of 65 in default in 2015.

Studies indicate that these borrowers often reach retirement as financially strained as peers who did not pursue higher education. A complicating factor is the government’s policy of recouping student loan debts by garnishing Social Security benefits from older citizens. 

Sen. Warren and over 30 co-signatories are requesting a meeting by April 2 with the heads of three federal agencies responsible for collecting funds – the Social Security Administration, Treasury Department, and Education Department.

This letter, issued on Thursday at 7 p.m., had been acknowledged by the Social Security Administration and the Department of Education as of Wednesday morning, with responses forthcoming directly from the agencies. The Treasury Department had not responded at the time of the request for comments.

Student debt impact on elderly Americans:Reasons for the surge in loan burdens for older individuals

Impact of Student Loans on Social Security

Via legislation enacted in the mid-1990s, the Treasury Department collaborates with the Education Department to recover funds from defaulted federal student loans by withholding portions from recipients’ Social Security or disability benefits. Up to 15% of monthly benefits can be withheld, equating to an average of about $2,500 per year. The letter alerts to the disproportionate impact of this process, known as “administrative offset,” on older loan recipients.

In the past year, more than 3.5 million Americans aged 60 and older carried unresolved student loan debts – a sixfold increase from 2004, as data indicates. This debt rose to over $125 billion last year, marking a nineteen-fold surge from 2004. Over the same period, the count of Social Security beneficiaries facing offset deductions due to student loan defaults soared from approximately 36,000 in 2002 to 173,000 in 2015, based on a Government Accountability Office study.

Recipients impacted by these offsets on their Social Security payouts are typically individuals who’ve struggled for extended periods to repay their loans. A major portion of the collected amount often goes towards fees and interests, with minimal contributions to repay the principal.

“Offsetting Social Security benefits can push beneficiaries closer to – or even into – poverty,” the letter notes. Lawmakers argue that the program undermines its responsibility to provide for “‘the general welfare,’ basic economic security, and the well-being of vulnerable Americans,” in such scenarios. The resolution, per the letter’s proposals, is to exempt Social Security retirement, survivor, and disability benefits from offsets related to student loans. 

Other signatories to the letter include Senators Ron Wyden, D-Wyo.; Richard Blumenthal, D-Conn.; Laphonza Butler, D-Calif.; Mazie Hirono, D-Hawaii; Edward J. Markey, D-Mass.; Jeff Merkley, D-Ore.; Alex Padilla, D-Calif.; Bernie Sanders, I-Vt.; Brian Schatz, D-Hawaii; Tina Smith, D-Minn.; Chris Van Hollen, D-Md.; Peter Welch, D-Vt.; and Sheldon Whitehouse, D-R.I. Representatives on the list are Ayanna Pressley, D-Mass.; Raúl Grijalva, D-Ariz.; John Larson, D-Conn.; Alma Adams, D-N.C.; Becca Balint, D-Vt.; Jamaal Bowman, D-N.Y.; Cori Bush, D-Mo.; Danny Davis, D-Ill.; Robert Garcia, D-Calif.; Sheila Jackson Lee D-Texas; Pramila Jayapal, D-Wash.; Doris Matsui, D-Calif.; James McGovern, D-Mass.; Jerrold Nadler, D-N.Y.; Alexandria Ocasio-Cortez, D-N.Y.; Bill Pascrell, D-N.J.; Janice Schakowsky, D-Ill.; Grace Napolitano, D-Calif.; and Frederica Wilson, D-Fla. 

For more:Estimate for 2025 COLA rises with inflation, but seniors express discontent about the shortfall.

The appeal to eliminate the offset practice comes amid additional initiatives aiming to assist Social Security beneficiaries.

Recipients receiving benefits through Social Security Disability Insurance are typically qualified for automatic cancellation of student loans. President Joe Biden’s relief measures involve alterations to this forgiveness program, leading to the forgiveness of loans for hundreds of thousands of disabled borrowers since 2021.