Millions of Americans, especially older adults who depend on Social Security for survival, may soon see a cut in their monthly benefits starting June 2025. The reason? Unpaid student loan debt. As per recent reports in U.S. media, the government has resumed actions to recover unpaid loans by deducting money directly from Social Security payments.
Older Americans and Student Loans: A Growing Problem
Today, more than 2.9 million Americans aged 62 and above still carry federal student loan debt. This number has jumped by over 70% since 2017, according to data from the U.S. Department of Education. Many of these loans were taken to either fund their own education later in life or to help children or grandchildren attend college.
Unfortunately, failing to repay these loans can now lead to direct cuts from their monthly Social Security payments.
Trump Administration Resumes Debt Collections
During the COVID-19 pandemic, these collection efforts were put on hold to reduce financial pressure on struggling borrowers. But recently, under the Trump administration, these aggressive collection measures have been restarted.
This means that if you are a retired borrower who defaulted on a federal student loan, you could now face automatic deductions from your Social Security benefits.
How Does It Work? The Treasury Offset Program (TOP)
The Treasury Offset Program (TOP) is a system that lets the federal government take part of your benefits—like tax refunds or Social Security payments—to cover outstanding debts.
If you’ve defaulted on a student loan, the government can deduct up to 15% of your monthly Social Security check through this program. However, they cannot reduce your payment below $750 per month.
What Happens Before the Deductions Begin?
Before any money is taken, the government must send a “notice of intent to offset” to your last known address. This letter gives you 65 days to respond before the deductions begin. You can appeal or try to settle the debt during this time.
It’s important to note that this notice is sent only once, and once deductions begin, they continue monthly until the full debt is paid or the default is cleared.
When Will the Deductions Start?
The government resumed these collection efforts on May 5, 2025. If you are affected and haven’t taken action yet, you may see deductions starting from your June 2025 Social Security payment.
This is not a new law—it’s part of existing U.S. policies that have been in place for more than 20 years. The only reason collections stopped was due to pandemic-related financial relief measures.
When Is a Loan Considered in Default?
If your federal student loan has not been paid for 270 days (around nine months), you are officially in default. Once this happens:
- Your loan is handed over to a collection agency
- The agency may initiate wage garnishment
- They can also begin offsetting Social Security payments
- Legal actions may be taken in severe cases
Once the loan is in collections, resolving the debt becomes more complicated and costly.
Why This Matters for Retirees
For retirees, Social Security is often the main source of income. Losing even 15% of it can make it hard to cover daily needs like rent, food, and medicine. Around half of Social Security beneficiaries rely on it for 90% or more of their living expenses.
This move could put additional strain on those already struggling with high medical bills and housing costs.