Your Social Security payment, tax refunds could reduce significantly in May, here's why
Millions of students will receive significantly lower social security and tax refund payments starting in May
Millions of students will receive significantly lower social security and tax refund payments starting May. The Trump administration announced that the Department of Education (DOE) will resume debt collection on defaulted loans after a year-long pause since the COVID-19 pandemic.
Starting May 2025, the Treasury Offset Program will be reinstated, allowing the government to withhold tax refunds, social security payments, and other benefits to recover unpaid student loans.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Secretary Linda McMahon said on Monday.
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"There will not be any mass loan forgiveness," the education department's announcement read.
According to PBS data, over 5.3 million federal student loan borrowers are in default and have not made a payment for over nine months. Around 4 million borrowers are in late-stage delinquency, DOE data states.
How will the withholding process unfold
Notification: Over the next two weeks, the Education Department will email borrowers in default, urging them to make a payment or enroll in a repayment plan. Borrowers will be directed to a government website with instructions on how to resolve their default status.
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Treasury Offset Program: If borrowers do not act by May 5, their debts will be referred to the TOP. This program allows the government to withhold up to 15% of a borrower’s Social Security benefits, tax refunds, or other federal payments. For Social Security, the withheld amount cannot reduce monthly payments below $750 to ensure a minimum level of support.
Wage garnishment: In addition to benefit offsets, the government can garnish up to 15% of a borrower’s disposable income. This applies to those in default who are employed, further compounding financial strain.
The Education Department has emphasized that borrowers can avoid these measures by contacting the Default Resolution Group to make a payment or enroll in an income-driven repayment (IDR) plan, which adjusts monthly payments based on income and family size.
