No, Your Social Security Benefits Won't Be Garnished if Your Student Loans Are in Default -- For Now

The Department of Education announced it would pause wage garnishment efforts on Social Security benefits for borrowers whose loans are in default -- for now.

In April, the Department of Education warned borrowers whose student loans were in default that involuntary collections would begin this summer. Loan servicers could begin ordering employers to garnish wages up to 15%, and the government could withhold money from income tax refunds and other federal payments, like Social Security benefits. 

Loan servicers can first report loans that are 90 days past due as delinquent, which can damage your credit score. But once federal student loans are 270 days past due, they enter into default.

Monday evening's announcement came just hours before June's first round of Social Security checks were deposited on June 3. 

"The Department has not offset any Social Security benefits since restarting collections on May 5, and has put a pause on any future Social Security offsets," a DOE spokesperson said in an email to CNET. The statement also added that the department will proactively reach out to default borrowers about affordable loan repayment options and help them get back in good standing.

While that's good news, the pause isn't expected to last forever. 

Mark Kantrowitz, a student loan and financial aid expert, says the pause could only be temporary. "Borrowers are still at risk of having Social Security disability and retirement benefit payments offset in the future," Kantrowitz said.

For now, the federal government can still offset your paycheck or income tax refund if you have defaulted student loans. Here's what you can do to hopefully avoid garnishment and get your student loans in good standing. 

What to do if your student loans are in default and receive Social Security benefits

If your loans are in default, Kantrowitz said that it's still very likely that the Department of Education will reverse the pause because it's the Treasury Offset Program's most effective way of collecting defaulted student loans. So it's best to take action sooner rather than later.
"The US Department of Education may have paused the Social Security offsets because it conflicts with the administration's assertions that they aren't cutting Social Security," he said. 

Elaine Rubin, student loan expert and Edvisors Corporate Communications Director, added that if you receive Social Security benefits but are in default on your student loans, use this pause to explore options to get your student loans back in good standing. "This delay is offering time to explore and complete options to avoid offsets or garnishments in the future," said Rubin.
Borrowers in default have options. You could consider loan rehabilitation, where you'll make nine consecutive on-time payments to get out of default, or loan consolidation, which can help you get your loans onto an income-driven repayment plan, potentially lowering your monthly payment.
However, if no action is taken, borrowers in default should expect collections if they don't find a way to get their loans out of default before the pause ends, Rubin said. 

To explore all of your options, contact the US Department of Education's Default Resolution Group.