Social Security Update: Delay in Student Loan Payments Could Cost You $2500 in Benefits

By Mary Webber Jan 05 2023, 20:09 PM EST

Your Social Security payments could be reduced if you fail to pay for your student loan payments regularly.

New research from the Center for Retirement Research at Boston College found that once the collections on student loan payments resume, the reduction in annual Social Security benefits could be about $2,500 on average based on 2019 data.

It usually amounts to 4% to 6% of household income, which is an amount that could pay off the average person's credit card balance.

Less than 5% of beneficiaries currently have student loan debt. However, those balances are expected to be significantly higher for future beneficiaries.

The study also noted that future beneficiaries are also expected to have higher delinquency rates.

Siyan Liu, a research economist at the Center for Retirement Research, said that younger people holding student loans are much larger. Liu added that if it continues into retirement, future beneficiaries could face benefit upsets if they have trouble making payments.

A Boston-based lawyer specializing in student loan law, Adam Minsky, said that it has been a real issue for people on a fixed income when Social Security withhold 15% of the total benefit for student loan debtors.

Student Loan Payments Eroding Social Security Benefits

Researchers believe that the withheld 15% or the $750 per month is pushing people below the poverty line.

Executive vice president and director of state policy at the Center for Responsible Lending, Diane Standaert, said that many people are unaware of the options available to stop the seizure of their benefits.

Student loan debtors can appeal to the Department of Education, instead of the Social Security Administration.

Student loan payments can also be paid by contacting your loan servicer before opting for the default mode of payment.

Student loan debtors can also use the Request to Stop or Reduce Offset of Social Security Benefits form.

The Department of Education noted that around 2.7 million ages 62 and up owed more than $107.3 billion in federal loans as of September.

Student Loan Payments

U.S. President Joe Biden introduced a student loan forgiveness program, which vows to provide up to $20,000 of debt relief for millions of borrowers. However, the resolution is currently hanging due to legal challenges being resolved in court.

The Supreme Court will hear arguments in February regarding two cases about the forgiveness program. The decision is expected by June.

Approximately 26 million people applied before the federal district court struck down the program on November 10. The application for the program officially started on October 17.

Individual borrowers who make less than $125,000 a year and married couples or heads of households who make less than $250,000 yearly will see up to $10,000 of their student loan canceled.

An individual can also be qualified for up to $20,000 of debt forgiveness if a qualifying borrower also received a federal Pell grant while enrolled in college.

This article is owned by Latin Post.

Written by: Mary Webber

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