Trump pauses Social Security benefit cuts over defaulted student loans

The U.S. Department of Education is pausing its plan to garnish people’s Social Security benefits if they have defaulted on their student loans, a spokesperson for the agency tells CNBC.

“The Trump Administration is committed to protecting Social Security recipients who oftentimes rely on a fixed income,” said Ellen Keast, an Education Department spokesperson.

The development is an abrupt change in policy by the administration.

The Trump administration announced on April 21 that it would resume collection activity on the country’s $1.6 trillion student loan portfolio. For nearly half a decade, the government did not go after those who’d fallen behind as part of Covid-era policies.

The federal government has extraordinary collection powers on its student loans and it can seize borrowers’ tax refunds, paychecks and Social Security retirement and disability benefits. Social Security recipients can see their checks reduced by up to 15% to pay back their defaulted student loan.

More than 450,000 federal student loan borrowers age 62 and older are in default on their federal student loans and likely to be receiving Social Security benefits, according to the Consumer Financial Protection Bureau.

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