WELFARE
What is the Social Security warning that jeopardizes benefits for seniors?
Understanding the Treasury Offset Program means you can protect your Social Security benefits and navigate your student loan repayment without issue.
Social Security benefits are a vital lifeline for millions of retirees, survivors, and disabled individuals. However, there’s a little-known program that can put a dent in those benefits: the Treasury Offset Program (TOP).
TOP allows the government to withhold a portion of Social Security payments to collect on defaulted debts, including federal student loans. If you’re behind on your federal student loans and haven’t made payments for at least 9 months (in default), TOP can snatch up to 15% of your monthly Social Security benefit.
This prospect will certainly be alarming for seniors who depend on Social Security to make ends meet. While the program helps recoup defaulted loans, it can create hardship for those already facing financial difficulties.
Why it’s important to be aware of TOP
It applies only to federal student loans: Private lenders cannot use TOP to collect on defaulted debts.
The impact can be significant: Losing 15% of your Social Security benefit can make a real difference in affording basic necessities.
Alternatives exist: Income-driven repayment plans (IDR) can significantly reduce your monthly student loan payment, making it more manageable.
What to do if you are already in default
The Department of Education offers a rehabilitation program that allows you to make a series of on-time payments (usually 9 on-time monthly payments within a 20-month period) to get your loans out of default. Once rehabilitated, TOP can no longer withhold your Social Security benefits.
IDR plans are a lifesaver for borrowers struggling with high student loan debt. These plans base your monthly payment on your current income and family size, potentially lowering it considerably. One of these will be the recently-announced SAVE plan.