These retirees may be at risk of having their Social Security checks garnished

Back in October, millions of federal student loan borrowers resumed repayment after a more than three-year pause — among them Social Security recipients. Congressional Democrats are now raising red flags about the penalties older borrowers could face in the near future if they fall behind on their payments.

When a borrower misses nine months of federal student loan payments, they go into default, and when that happens, the federal government has extreme powers to collect any overdue debt, including garnishing Social Security payments.

That’s not currently happening — the federal government stopped all garnishments when student loan payments were suspended in 2020 in response to COVID-19. And when payments resumed, a temporary 12-month “on-ramp” period was put in place, protecting borrowers who miss payments from being put into default.

But that protection expires this fall, and if action isn’t taken, older borrowers who struggle to pay their debt will face serious financial risks, Democrats wrote in a March letter. Social Security beneficiaries who default on their student loan debt could lose up to 15% of their monthly payments. This was a growing reality prior to the pandemic, and one which lawmakers called ”devastating” in the letter to officials. The National Institute on Retirement Security estimates that roughly 40% of older adults rely solely on Social Security as retirement income.

“We are concerned that borrowers will face the extreme consequences associated with missed payments when protections expire in late 2024,” Sen. Elizabeth Warren, D-Mass., and more than 30 other legislators said in the letter.

It’s unknown right now just how many people are at risk of garnishment, but the lawmakers said that 3.5 million people 60 and older have student loan debt.

You can learn more about the issue, and the measures Democrats are calling for to remedy it, by reading Money reporter Pete Grieve’s story. If you have a retirement story of your own to share, or any burning questions, you can drop me a line at mcags@money.com.

— Mary Ellen Cagnassola, Money reporter

That’s how much Americans believe they’ll need to retire comfortably on average, a new record, according to Northwestern Mutual’s newest Planning & Progress study. At the same time, the average amount that U.S. adults have saved dropped from $89,300 in 2023 to $88,400 now. (That’s also $10,000 less than the average retirement savings recorded in 2021, when the metric hit a five-year peak.)

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• 🍷 Americans 65 and older are drinking more, a trend that recent research shows began even before the pandemic, according to the New York Times.
• 💸 Everyday Americans are having to put retirement savings on the backburner as competing costs like groceries and housing eat up their income. CNN Business details the extent of the growing crisis in its new story.
• 👷 Kimberly Blanton, writer and editor for the Center for Retirement Research’s Squared Away blog, explains why delaying Social Security isn’t always possible for blue-collar workers.