No Deductions To Social Security To Offset Defaulted Student Loans: Education Department

Authored by Melanie Sun via The Epoch Times,

The Department of Education announced a policy change on June 2, saying it will not garnish Social Security payments to collect unpaid federal student loans.

Education Department spokeswoman Ellen Keast told The Epoch Times that the department has “put a pause on any future social security offsets.”

In April, the Trump administration announced it would be resuming collection of loan repayments on May 5, with “other actions to help borrowers get back into repayment.”

Keast said that since student loan repayments restarted, the department has “not offset any social security benefits” from those who have not been able to make repayments and that this will continue.

The pause has no end date.

Keast said the reason for the pause was that the Trump administration is “committed to protecting Social Security recipients who oftentimes rely on a fixed income.”

The department had said in announcing the resumption of repayments that federal law allowed it to request the Treasury to withhold money owed from income tax refunds, taxable social security payments, and other federal payments to offset defaulted student loans.

Loan recipients registered as “totally disabled” with the Social Security Administration would have their offset payments suspended, and those with extenuating circumstances were told they had the right to “request a review.”

The department said in May that the offsets from existing federal payments to recipients could begin as early as June.

Since March 2020, due to the COVID-19 pandemic, the federal government has paused all repayments for those in default on their loans.

The Biden administration then extended Congress’s October 2023 deadline for ending the pandemic relief measure, which President Donald Trump’s secretary of education, Linda McMahon, said needed to be addressed as “the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.”

The department criticized the Biden administration’s refusal to lift the collections pause as a way to “win points with borrowers” at an indirect cost to themselves and all other taxpayers who would shoulder financing the extended loans.

The department said on April 21 that within a few months, it expected around 25 percent, or $400 billion, of the $1.6 trillion federal student loan portfolio to be in default, while only 38 percent of 42.7 million borrowers are current with their repayments.

About 5 million borrowers—or 12 percent—were in default in April, having failed to make any monthly repayments for more than 270 days, according to the department. Another 4 million had not made repayments in 3–6 months, although almost 1.9 million borrowers had tried to make repayments but were unable to get their payments processed due to a pause put in place by the Biden administration.

Keast told The Epoch Times that the department had other repayment options for recipients that would allow them to keep receiving their full social security payment.

“In the coming weeks, the Department will begin proactive outreach to recipients about affordable loan repayment options and help them back into good standing,” she said.

The department said it has set up a website called Federal Student Aid that provides recipients with information and contact details about the repayment plans that the department is offering.