If you’re a business owner nearing retirement or have recently stepped away from your company, unpaid student loans could reduce the Social Security income you expect to receive.
The federal government has restarted a program that collects overdue student loan balances by withholding part of a person’s Social Security benefit. This collection method, known as the Treasury Offset Program, allows up to 15 percent of monthly benefits to be applied toward defaulted federal loans. The offset applies to both retirement and disability payments. However, payments will not drop below $750.00 per month.
The Department of Education has already begun notifying more than 190,000 borrowers who are in default. Others will receive notices later this summer. Each borrower will receive 30 days’ notice before any reduction begins.
If you paused your student loan payments during the pandemic, you may not be aware of your status. With collections restarting in 2023, the government is now actively recovering unpaid balances by seizing tax refunds, wages, and federal benefits like Social Security.
A growing number of older adults still carry student loan debt. Nearly three million Americans aged 62 and older have federal loans. More than 450,000 are already in default.
If you’re transitioning out of your business and planning to rely on Social Security as part of your retirement income, this could affect your financial outlook. It’s a good time to confirm the status of any federal loans you may have and explore your options for resolving them before offsets begin.
