Millions of older adults with student debt are at risk of losing some Social Security benefits, lawmakers warn

• Millions of older adults who are behind on their student loans could soon receive a smaller Social Security benefit.
• That warning from Democratic lawmakers, including Sen. Elizabeth Warren, D-Mass., and Sen. Ron Wyden, D-Ore., came in a letter to the Biden administration.
• "When borrowers are in collections, on average their Social Security benefits are estimated to be reduced by $2,500 annually," the lawmakers wrote. "This can be a devastating blow to those who rely on Social Security as their primary source of income."

Millions of older adults who are behind on their student loans could soon receive a smaller Social Security benefit.

That was the warning from Democratic lawmakers, including Sen. Elizabeth Warren, D-Mass., and Sen. Ron Wyden, D-Ore., in a recent letter to the Biden administration.

"When borrowers are in collections, on average their Social Security benefits are estimated to be reduced by $2,500 annually," the lawmakers wrote on March 19. "This can be a devastating blow to those who rely on Social Security as their primary source of income."

The U.S. government has extraordinary collection powers on federal debts and it can seize borrowers' tax refunds, wages and retirement benefits. Social Security recipients can see up to 15% of their benefit reduced to pay back their defaulted student debt, which "can push beneficiaries closer to — or even into — poverty," the lawmakers wrote.

After the pandemic-era pause on student loan payments expired in October of last year, the U.S. Department of Education said it wouldn't resume its collection practices for 12 months.

However, the lawmakers wrote, "we are concerned that borrowers will face the extreme consequences associated with missed payments when protections expire in late 2024."

They asked the Biden administration to provide a briefing on its efforts to address the issue by April 3.

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The U.S. Department of Education did not immediately respond to a request for comment.

The government's collection practices with student loan borrowers, including the garnishment of wages and Social Security benefits, is an area under review, a source familiar with its plans told CNBC.

'A morally bankrupt policy'

Outstanding student debt has been growing among older people. To that point, more than 3.5 million Americans aged 60 and older had student debt in 2023, a sixfold increase from 2004, according to the lawmakers.

Consumer advocates say the government's collection actions are extreme.

"Many retirees need their Social Security benefits to survive," said higher education expert Mark Kantrowitz.

Social Security benefits constitute nearly all income for one-third of recipients over the age of 65, the lawmakers said in their letter. The average check for retired workers is $1,907 this year, according to the Social Security Administration.

The garnishments mean older adults are often "forced to choose between skipping meals or rationing medicine," Kantrowitz said. "It is a morally bankrupt policy."