Van Hollen, Warren, Wyden, Pressley, Jayapal, Grijalva, Larson, Lawmakers Call on Biden Administration to Stop Garnishing Social Security Payments to Pay Defaulted Student Loans

WASHINGTON – Today, U.S. Senator Chris Van Hollen (D-Md.) joined Senators Elizabeth Warren (D-Mass.) and Ron Wyden (D-Ore.), Chair of the Senate Finance Committee, along with U.S. Representatives Ayanna Pressley (D-Mass.), Pramila Jayapal (D-Wash.), Raúl Grijalva (D-Ariz.), and John Larson (D-Conn.) in calling on the Social Security Administration (SSA), the U.S. Department of the Treasury (Treasury), and the U.S. Department of Education (ED) to end the practice of offsetting Social Security benefits to pay off defaulted student loans. 

Offsets under the Treasury Offset Program (TOP) are a particularly devastating practice for seniors and people with disabilities who rely on Social Security as their sole source of income. In fact, a 2016 Government Accountability Office report requested by former Senator Claire McCaskill and Senator Warren revealed that Social Security offsets to recoup defaulted student loan debt were pushing tens of thousands of senior Americans below the poverty line.

“As a growing number of older Americans have federal student loan debt when they near or enter retirement age, we are concerned that these older borrowers are disproportionately subject to TOP collection,” wrote the lawmakers. “These borrowers who have struggled with their student loan repayment progress could see their wages, tax refunds, and Social Security checks garnished or offset.”

The number of older Americans with student loan debt has been rising steadily. Nearly 40 percent of federal borrowers over the age of 65 have defaulted on their student loans. Under TOP, the federal government can withhold up to 15 percent of monthly Social Security or disability benefits for these defaulted student loans. Roughly 44 percent of borrowers who were 50 years and older at the time of their initial offset were subject to this maximum Social Security benefit withholding.

Additionally, the lawmakers explain that there is little evidence that these offsets are a meaningful solution to collecting outstanding debt. Almost a third of borrowers 50 and older who had offsets lasting five years or longer had their loan balances increase during this time period. And more than 70 percent of the loan repayments collected through Social Security offsets were applied to fees and interest.

“Offsetting Social Security benefits can push beneficiaries closer to—or even into—poverty, undermining the Social Security Act’s mission of providing for ‘the general welfare,’ basic economic security, and the well-being of vulnerable Americans,” the lawmakers wrote. “Accordingly, we urge you to explore exempting Social Security retirement, survivor, and disability benefits from administrative offset due to student loan debt.”

The letter was also signed by Senators Richard Blumenthal (D-Conn.), Laphonza Butler (D-Calif.), Mazie Hirono (D-Hawai’i), Edward J. Markey (D-Mass.), Jeff Merkley (D-Ore.), Alex Padilla (D-Calif.), Bernie Sanders (I-Vt.), Brian Schatz (D-Hawai’i), Tina Smith (D-Minn.), Peter Welch (D-Vt.), and Sheldon Whitehouse (D-R.I.).

In the House, the letter is also signed by Representatives Alma Adams (D-N.C.), Becca Balint (D-Vt.), Jamaal Bowman (D-N.Y.), Cori Bush (D-Mo.), Danny Davis (D-Ill.), Robert Garcia (D-Calif.), Sheila Jackson Lee (D-Tex.), Doris Matsui (D-Calif.), James McGovern (D-Mass.), Jerrold Nadler (D-N.Y.), Alexandria Ocasio-Cortez (D-N.Y.), Bill Pascrell (D-N.J.), Janice Schakowsky (D-Ill.), Grace Napolitano (D-Calif.), and Frederica Wilson (D-Fla.). 

The full text of the letter is available here and below.

Dear Commissioner O’Malley, Secretary Yellen, and Secretary Cardona:

We write to request that the Social Security Administration (SSA), the U.S. Department of the Treasury (Treasury), and the U.S. Department of Education (ED) consider seeking an end to the practice of offsetting Social Security benefits to pay off defaulted student loans, a particularly devastating practice for seniors and people with disabilities who rely on Social Security as their sole source of income. We applaud the Biden Administration’s ongoing efforts to address student debt by providing relief to nearly four million Americans, including automatic cancellation for half a million people with total and permanent disabilities, and urge you to build on this success by protecting Social Security benefits from being offset to pay down student loan debt.

The Treasury Offset Program (TOP), established under the Debt Collection Improvement Act of 1996, authorizes the collection of defaulted federal student loans and other federal nontax debt by the Treasury Department. As a growing number of older Americans have federal student loan debt when they near or enter retirement age, we are concerned that these older borrowers are disproportionately subject to TOP collection. In these cases, the Department of Education and Treasury coordinate to withhold a portion of Social Security or disability benefits to recoup funds for defaulted loans, in a process known as “administrative offset.”

The number of older Americans with student loan debt has been rising steadily. In 2023, over 3.5 million Americans aged 60 and older had outstanding student loan debt, worth a total of over $125 billion. This represents a six-fold increase in the number of older borrowers and a nineteen-fold increase in the amount owed by older Americans compared to 2004.

Unfortunately, older borrowers often face the greatest repayment struggles, with nearly 40 percent of federal borrowers over the age of 65 in default on their student loans. These borrowers who have struggled with their student loan repayment progress could see their wages, tax refunds, and Social Security checks garnished or offset. Under TOP, the federal government can withhold up to 15 percent of monthly Social Security or disability benefits for defaulted student loans. Roughly 44 percent of borrowers who were 50 years and older at the time of their initial offset were subject to this maximum Social Security benefit withholding. When borrowers are in collections, on average their Social Security benefits are estimated to be reduced by $2,500 annually. This can be a devastating blow to those who rely on Social Security as their primary source of income. According to SSA, Social Security benefits represented 90 percent or more of total income for about one-third of beneficiaries aged 65 and older in 2014, the last year of available data.

There is little evidence that these offsets are a meaningful solution to collecting outstanding debt. Almost a third of borrowers 50 and older who had offsets lasting five years or longer had their loan balances increase during this time period. And more than 70 percent of the loan repayments collected through Social Security offsets were applied to fees and interest. Nonetheless, in the years prior to the March 2020 COVID-19 student loan payment pause, the number of Social Security beneficiaries subjected to offsets due to defaults surged dramatically. From fiscal years 2002 to 2015, the number of defaulted federal student loan borrowers of any age with Social Security offsets more than quadrupled, jumping from around 36,000 to 173,000 borrowers. This trend was particularly pronounced for borrowers aged 65 and older: the number of borrowers in that age range with offsets increased by a staggering 540 percent. By fiscal year 2015, Social Security checks of approximately 114,000 borrowers aged 50 and older were being offset to repay defaulted federal student loans.

The payment pause offered temporary relief for Americans struggling with student debt and allowed for older Americans to retain their full Social Security checks. However, on October 1, 2023, ED lifted the suspension of loan payments, and student loan repayments resumed. This unprecedented restart of payments for tens of millions of borrowers raises serious concerns about their financial well-being. While we commend the Biden Administration’s 12-month on-ramp to repayment, which offers temporary protection from delinquency, reporting, and debt collection, we are concerned that borrowers will face the extreme consequences associated with missed payments when protections expire in late 2024. At this point, many borrowers could once again face Social Security offsets due to defaulted student loans.

Given alarming reports exposing the crushing impact of offsets on older Americans dependent on Social Security, we urge you to consider seeking an end to administrative offset of student loan debts for all Social Security benefits. Under the Debt Collection Improvement Act, the head of a benefit-paying agency may request the Treasury Secretary exempt certain federal payments from administrative offset when such offset would “tend to interfere substantially with or defeat the purposes of the payment certifying agency’s program.” Offsetting Social Security benefits can push beneficiaries closer to—or even into—poverty, undermining the Social Security Act’s mission of providing for “the general welfare,” basic economic security, and the well-being of vulnerable Americans. Accordingly, we urge you to explore exempting Social Security retirement, survivor, and disability benefits from administrative offset due to student loan debt.

We ask that you provide a briefing on your efforts no later than April 3, 2024. Thank you for your attention to this important matter.

Sincerely,