Many retired Americans may soon see a part of their Social Security payments taken away if they have not paid back their student loans. This change is starting from June 2025, and it mostly affects people who still owe money to the federal government. Let’s understand what’s happening and how it could affect millions of elderly citizens in the U.S.
Growing Number of Retirees Have Student Loan Debt
Today, around 2.9 million Americans who are 62 or older still have student loan debt. This number has gone up by more than 70% since 2017, based on data from the U.S. Department of Education. It shows that more and more older Americans are dealing with unpaid education loans.
What Triggered the Collections to Restart?
During the COVID-19 pandemic, the U.S. government had stopped collecting overdue loans to help people financially. But now, under policies restarted from the Trump administration, collections have resumed. This means that retirees who haven’t paid their loans could lose part of their monthly Social Security checks.
How Does the Government Take the Money?
The government uses a system called the Treasury Offset Program (TOP). Through this program, they can take up to 15% of your Social Security income to pay off defaulted federal student loans. However, the law says your payment cannot go below $750 per month, even after the deduction.
Before this happens, the borrower is sent a notice to their last known address. This letter explains that the deductions and negative credit report will begin within 65 days if the borrower doesn’t act.
When Will the Deductions Start?
The collections officially resumed on May 5, 2025, which means the deductions from Social Security benefits could start from June 2025. This will affect those who still haven’t paid or made arrangements for their debt.
What Happens When You Default?
A person is said to be in loan default if they have not made payments for 270 days. Once that happens, the loan is handed over to a collection agency. These agencies are hired by the federal government to collect money. They may even take legal action or reduce Social Security payments.
Will the Government Give Another Warning?
As of now, the U.S. Department of Education has not confirmed if they will send out a new round of warning letters. If you already got the notice before, it may not be sent again. So, it’s very important for borrowers to check their loan status and act quickly.
What Should Affected Retirees Do?
If you’re a retiree with unpaid student loans, it’s important to contact your loan servicer or the Department of Education. There are ways to settle your debt or even apply for programs that can help reduce or cancel the amount you owe.
The return of federal debt collections could hurt many elderly Americans who depend on Social Security to survive. With rising costs and limited income, having a portion of their benefits taken away can make life more difficult. Retirees should stay informed and take steps to resolve their debts before the deductions begin. Programs like the Treasury Offset Program are not new, but their reactivation could affect millions starting this June.
