The Trump administration paused its plan to garnish Social Security benefits for those who have defaulted on their student loans — but says borrowers’ paychecks are still at risk.
“Wage garnishment will begin later this summer,” Ellen Keast, a U.S. Department of Education spokesperson, told CNBC.
Since the Covid pandemic began in March 2020, collection activity on federal student loans had mostly been on hold. The Biden administration focused on extending relief measures to struggling borrowers in the wake of the public health crisis and helping them to get current.
The Trump administration’s move to resume collection efforts and garnish wages of those behind on their student loans is a sharp turn away from that strategy. Officials have said that taxpayers shouldn’t be on the hook when people don’t repay their education debt.
“Borrowers should pay back the debts they take on,” said U.S. Secretary of Education Linda McMahon in a video posted on X on April 22.
Here’s what borrowers need to know about the Education Department’s current collection plans.
Social Security benefits are safe, for now
Keast said on Monday that the administration was delaying its plan to offset Social Security benefits for borrowers with a defaulted student loan.
Some older borrowers who were bracing for a reduced benefit check as early as Tuesday.
The Education Department previously said Social Security benefits could be garnished starting in June. Depending on details like their birth date and when they began receiving benefits, a recipient’s monthly Social Security check may arrive June 3, 11, 18 or 25 this year, according to the Social Security Administration.
More than 450,000 federal student loan borrowers age 62 and older are in default on their federal student loans and likely to be receiving Social Security benefits, according to the Consumer Financial Protection Bureau.
More from Personal Finance:
What the House GOP budget bill means for your money
‘Maycember’ is over — here’s how to recover financially
Court order challenges Trump’s plan to move student loans to SBA
The administration’s announcement gives borrowers more time to try to get current, and to avoid a reduced benefit check down the line.
“The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income,” said Keast.
Wages are still at risk
The Education Dept. says defaulted student loan borrowers could see their wages garnished later this summer.
The agency can garnish up to 15% of your disposable, or after-tax, pay, said higher education expert Mark Kantrowitz. By law, you must be left with at least 30 times the federal minimum hourly wage ($7.25) a week, which is $217.50, Kantrowitz said.
Borrowers in default will receive a 30-day notice before their wages are garnished, a spokesperson for the Education Department previously told CNBC.
During that period, you should have the option to have a hearing before an administrative law judge, Kantrowitz said. The Education Department notice is supposed to include information on how you request that, he said.
Your wages may be protected if you’ve recently been unemployed, or if you’ve recently filed for bankruptcy, Kantrowitz said.
Borrowers can also challenge the wage garnishment if it will result in financial hardship, he added.