Stop offsetting Social Security to student loan defaulters

Lawmakers: Number of seniors denied benefits

A startling number of seniors are denied their full Social Security benefits because they defaulted on student loan payments, prompting lawmakers to call for a halt to this practice.

A group of Democratic lawmakers, co-led by Sen. Elizabeth Warren of Massachusetts, sent a letter on Tuesday evening highlighting the devastating impact these offsets have on older Americans who rely on Social Security as their only source of income. The letter was shared in advance exclusively with USA TODAY.

Americans in their 60s or older are among the fastest-growing populations with outstanding student loan debt, and nearly 40% of federal borrowers over 65 were in default in 2015.

Research suggests these borrowers often approach retirement as poor as their counterparts who didn’t attend college. Compounding matters further is the federal government’s practice of collecting student loan money owed by tapping into senior citizens’ Social Security benefits.

The letter from Warren and more than 30 others calls for a briefing with the leaders of three federal agencies involved in garnering funds – the Social Security Administration, Treasury Department and Education Department – by April 2.

The letter was sent at 7 p.m. on Thursday. As of Wednesday morning, the Social Security Administration and Department of Education acknowledged they had received the letter, and spokespeople said the agencies will be responding to the lawmakers directly. Officials from the Treasury Department did not immediately respond to a request for comment.

How student loans affect Social Security

Through a law passed in the mid-1990s, the Treasury Department can work with the Education Department to recoup funds on defaulted federal student loans by withholding borrowers’ Social Security or disability benefits. The law allows up to 15% of the monthly benefits to be withheld, which means an average of roughly $2,500 per year. The letter warns that this process, known as “administrative offset,” disproportionately affects older borrowers.

Last year, more than 3.5 million Americans 60 and older had outstanding student loan debt – six times the number in 2004, data shows. That debt last year amounted to more than $125 billion, a 19-fold increase from 2004. Over a similar period, the number of Social Security beneficiaries who saw their checks offset because of student loan defaults also surged, from roughly 36,000 in 2002 to 173,000 in 2015, according to a Government Accountability Office report.

The borrowers who’ve been hit with these offsets on their Social Security checks are typically people who have been struggling for years to pay off their debt. Much of the money collected this way, moreover, goes toward fees and interest, with a small percentage applied toward the principal.

“Offsetting Social Security benefits can push beneficiaries closer to – or even into – poverty,” the letter says. The lawmakers say the program is undermining its duty to provide for “‘the general welfare,’ basic economic security and the well-being of vulnerable Americans,” in these cases. The solution, according to the letter writers, is exempting Social Security retirement, survivor and disability benefits from student loan-related offsets.

Other Senators who’ve signed onto the letter include Ron Wyden, D-Wyo.; Richard Blumenthal, D-Conn.; Laphonza Butler, D-Calif.; Mazie Hirono, D-Hawaii; Edward J. Markey, D-Mass.; Jeff Merkley, D-Ore.; Alex Padilla, D-Calif.; Bernie Sanders, I-Vt.; Brian Schatz, DHawaii; Tina Smith, D-Minn.; Chris Van Hollen, D-Md.; Peter Welch, D-Vt.; and Sheldon Whitehouse, D-R.I.

Representatives include Ayanna Pressley, D-Mass.; Raúl Grijalva, DAriz.; John Larson, D-Conn.; Alma Adams, D-N.C.; Becca Balint, D-Vt.; Jamaal Bowman, D-N.Y.; Cori Bush, D-Mo.; Danny Davis, D-Ill.; Robert Garcia, DCalif.; Sheila Jackson Lee D-Texas; Pramila Jayapal, D-Wash.; Doris Matsui, DCalif.; James McGovern, D-Mass.; Jerrold Nadler, D-N.Y.; Alexandria OcasioCortez, D-N.Y.; Bill Pascrell, D-N.J.; Janice Schakowsky, D-Ill.; Grace Napolitano, D-Calif.; and Frederica Wilson, DFla.

The request to do away with the offset comes amid other efforts to provide relief to Social Security beneficiaries.

Borrowers who receive benefits through Social Security Disability Insurance are typically eligible for automatic student loan cancellation. President Joe Biden’s relief initiatives include changes to that discharge program, and hundreds of thousands of disabled borrowers had loans forgiven since 2021.