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For millions of older Americans relying on Social Security to cover their bills, another financial gut punch may be on the way — and it’s coming from their own student debt.

The Trump administration has threatened, then revoked threats, to resume collections on federal student loans. A higher education expert, Mark Kantrowitz, told CNBC that if the administration proceeded with their initial plans, borrowers in default could see their Social Security benefits docked by as much as 15%.

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There are approximately 452,000 borrowers aged 62 or older with defaulted loans, some of whom are likely receiving Social Security benefits, according to a report from the Consumer Financial Protection Bureau.

Why your benefits could be garnished

The government has long had the power to garnish, or claw back, a portion of Social Security benefits to repay defaulted federal student loans.

But those collections were paused during the COVID-19 pandemic, and remained paused under the Biden administration. Now, the Trump administration has threatened to resume collections.

In May, the Department of Education announced it would soon resume involuntary collections, only to walk back the decision in June, when department spokeswoman Ellen Keast told CBS News it had “put a pause on any future Social Security offsets.”

It remains to be seen whether that pause will be indefinite.

What you need to know about the Social Security offset

If you’re in default on loans, the federal government could theoretically withhold up to 15% of your monthly Social Security benefit without your permission. But that would be the worst case scenario, and at least part of your benefits would remain.

Federal law protects the first $750 per month of Social Security income from garnishment. But for seniors already scraping by, even a small deduction can have a devastating impact. Of the 1.3 million Social Security beneficiaries with student loans, about 37% rely on an average monthly benefit payment of $1,523 for 90% of their income, according to the same Consumer Financial Protection Bureau report.

Regardless of whether the administration ultimately goes ahead with its collections, the threat should serve as a crucial wake-up call for anyone struggling with debt repayment.

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How else to fight back, or at least prepare

If you’re in default or nearing default, there are steps you can take now to reduce the risk of garnishment.

First, you may be able to ask for a hearing or file a request to stop or reduce the offset. If you’re facing medical issues, supporting dependents or already living below the poverty line, you can submit documentation proving financial hardship to the Treasury Department or its debt collection agency.

Second, you may be able to reenter good standing through loan rehabilitation or consolidation. Loan rehabilitation typically requires nine monthly payments, and the process can take several months. Both processes can stop wage or benefit garnishments.

Credible can help with loan consolidation by letting you shop around for lower interest rates with just a few clicks of your mouse. In just two minutes you can compare and contrast  lenders willing to consolidate your loans into one easy-to-manage payment.

Even if you’re just curious about your options, checking rates on Credible could be a good idea. It won’t hurt your credit score, it’s totally free and it could save you a bundle.

Other options for retirement

If you’re still working and planning to retire soon, retiring while in student loan default might now be riskier than it once was. If your retirement income plan was built around a full Social Security check, you may need to take a two-pronged approach and rethink your savings and spending strategies.

When it comes to savings, a good place to start is increasing your 401(k) or IRA contributions. Investing platforms like Acorns make that process easier, as they round up your purchases and automatically invest any spare change for your retirement. Right now, Acorns offers a 3% IRA match on new contributions during your first year with Acorns Gold.

If you’re just starting out on your investment journey, Acorns offers a $20 sign-up bonus when you set up a recurring deposit.

As for spending, it can pay to cut monthly expenses where you can. One of the biggest line-items over time is insurance. Like with loans, shopping around for home and auto insurance rates can also help you cut costs.

With OfficialHomeInsurance.com it takes just two minutes to comb through over 200 insurers for free and find the best deal for you in your area. The process can also be done entirely online.

The best part? OfficialHomeInsurance.com users can save an average of $482 per year.

Similarly, OfficialCarInsurance.com can help you switch to a more affordable auto insurance option within minutes.

After answering a few questions about yourself, your vehicle and driving history, you can compare quotes from trusted brands like Progressive, Allstate and GEICO. Depending on factors like the make and model of your car, you can find rates as low as $29 per month.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.