WEBVTT 00:00:00.000 --> 00:00:02.100 Welcome to another deep dive from Empowering 00:00:02.100 --> 00:00:04.780 Your Finance, focusing today on social security. 00:00:05.459 --> 00:00:07.839 We're tackling something causing a lot of worry. 00:00:08.439 --> 00:00:11.779 Social security benefit cuts, specifically linked 00:00:11.779 --> 00:00:14.679 to defaulted student loans. We've got some listener 00:00:14.679 --> 00:00:17.120 sources here that look like a really vital guide 00:00:17.120 --> 00:00:20.420 through this whole complex situation. So our 00:00:20.420 --> 00:00:23.239 mission today is to unpack these sources, figure 00:00:23.239 --> 00:00:25.500 out exactly what's happening, and maybe more 00:00:25.500 --> 00:00:27.640 importantly, what you need to know and what you 00:00:27.640 --> 00:00:30.719 can actually do about it. That's right. And it's 00:00:30.719 --> 00:00:33.079 a big deal now because after that pandemic pause, 00:00:33.899 --> 00:00:35.479 federal student loan collections are fully back 00:00:35.479 --> 00:00:37.479 online. This includes the government intercepting 00:00:37.479 --> 00:00:39.420 other federal payments. And yeah, that definitely 00:00:39.420 --> 00:00:41.119 includes Social Security benefits if there's 00:00:41.119 --> 00:00:44.600 a defaulted student loan. It's hitting thousands 00:00:44.600 --> 00:00:47.020 of people now, especially older Americans and 00:00:47.020 --> 00:00:49.380 folks with disabilities who often really depend 00:00:49.380 --> 00:00:51.340 on these benefits. OK, so let's jump straight 00:00:51.340 --> 00:00:54.359 into this alarming reality then. What the material 00:00:54.359 --> 00:00:56.619 seems to show is the main mechanism is the Treasury 00:00:56.619 --> 00:01:00.640 Offset Program, TOP. Exactly. TOP. Think of it 00:01:00.640 --> 00:01:03.039 as the government's tool for collecting debts 00:01:03.039 --> 00:01:06.120 owed to federal agencies. If they owe you money, 00:01:06.280 --> 00:01:08.980 like Social Security, but you owe them money... 00:01:08.640 --> 00:01:11.579 like for a defaulted loan, they can use TOP to, 00:01:11.579 --> 00:01:13.620 well, take it before it gets to you. And yes, 00:01:13.739 --> 00:01:15.819 it's actively being used again for defaulted 00:01:15.819 --> 00:01:18.120 federal student loans, intercepting those benefit 00:01:18.120 --> 00:01:20.140 payments. Right. And the sources get specific 00:01:20.140 --> 00:01:22.579 about how much, don't they? How do the cuts actually 00:01:22.579 --> 00:01:25.040 work? They do. The general rule mentioned is 00:01:25.040 --> 00:01:27.560 that they can take up to 15 % of your monthly 00:01:27.560 --> 00:01:31.409 Social Security benefit. 15%. 15%, wow. But there's 00:01:31.409 --> 00:01:34.609 a protection. Yes, crucially there is. The sources 00:01:34.609 --> 00:01:37.329 state your benefit cannot be reduced below $750 00:01:37.329 --> 00:01:40.670 per month after they take the offset. So that's 00:01:40.670 --> 00:01:43.689 $750 like a floor, a minimum safety net. But 00:01:43.689 --> 00:01:47.510 anything above that $750, well, that's potentially 00:01:47.510 --> 00:01:50.030 vulnerable if you're in default. And this $750 00:01:50.030 --> 00:01:52.469 floor, that connects to a policy change mentioned 00:01:52.469 --> 00:01:55.609 in the material, doesn't it? It does. This is 00:01:55.609 --> 00:01:58.090 quite significant. The sources note the Trump 00:01:58.090 --> 00:02:00.409 administration reinstated these collections and 00:02:00.409 --> 00:02:03.890 set that specific $750 minimum. Apparently this 00:02:03.890 --> 00:02:06.349 reversed an earlier Biden administration policy 00:02:06.349 --> 00:02:08.770 direction that aimed for a higher floor, something 00:02:08.770 --> 00:02:12.889 like $1 ,883 per month for some defaulted borrowers. 00:02:13.449 --> 00:02:15.409 That's a massive difference going from potentially 00:02:15.409 --> 00:02:20.849 $1 ,883 protected down to $750. That's huge for 00:02:20.849 --> 00:02:22.909 someone on a fixed income. It absolutely is. 00:02:23.150 --> 00:02:24.789 really highlights the policy attention here. 00:02:25.210 --> 00:02:28.050 And with that $750 floor, you have to ask, who's 00:02:28.050 --> 00:02:30.050 really feeling the pinch the most? The sources 00:02:30.050 --> 00:02:32.610 point pretty clearly. Older Americans, maybe 00:02:32.610 --> 00:02:35.629 those who took out parent POUS loans or COSIGN, 00:02:36.030 --> 00:02:37.669 and definitely individuals with disabilities 00:02:37.669 --> 00:02:40.189 relying on SSDI, Social Security Disability Insurance. 00:02:40.270 --> 00:02:42.349 Right. Those groups are often heavily reliant. 00:02:42.810 --> 00:02:44.610 But the material also draws a line regarding 00:02:44.610 --> 00:02:47.979 SSI, Supplemental Security Income. Yes. That's 00:02:47.979 --> 00:02:50.159 a really important distinction they make. SSI 00:02:50.159 --> 00:02:52.520 benefits are generally not subject to this kind 00:02:52.520 --> 00:02:55.280 of treasury offset for student loans. It's because 00:02:55.280 --> 00:02:58.020 SSI is fundamentally different. It's needs based, 00:02:58.259 --> 00:03:00.800 funded differently, and just operates under separate 00:03:00.800 --> 00:03:02.939 rules when it comes to these kinds of offsets. 00:03:03.379 --> 00:03:05.599 OK. That's good to clarify. So to understand 00:03:05.599 --> 00:03:07.460 why this is happening at all, we need to be clear 00:03:07.460 --> 00:03:10.699 on default. What does that actually mean for 00:03:10.699 --> 00:03:12.939 federal student loans, according to these sources? 00:03:13.259 --> 00:03:14.860 Right. It's not just missing a payment or two 00:03:14.860 --> 00:03:17.810 that's usually called delinquency. Default. Based 00:03:17.810 --> 00:03:20.009 on the info we have, typically means you haven't 00:03:20.009 --> 00:03:23.349 made payments for quite a while. Often it's cited 00:03:23.349 --> 00:03:27.009 as 270 days for direct loans. It's a much more 00:03:27.009 --> 00:03:29.430 serious status. So if someone's worried, what 00:03:29.430 --> 00:03:31.370 are the signs? What are the red flags mentioned 00:03:31.370 --> 00:03:33.330 in the material that say, hey, you might be in 00:03:33.330 --> 00:03:36.569 default and at risk? Well, the big ones are getting 00:03:36.569 --> 00:03:39.129 an official demand letter. This would come from 00:03:39.129 --> 00:03:41.590 the Department of Education or maybe a collection 00:03:41.590 --> 00:03:44.680 agency working for them. Also, check your credit 00:03:44.680 --> 00:03:47.259 report. You'd likely see the loan marked with 00:03:47.259 --> 00:03:49.659 a defaulted status. That's a pretty clear sign. 00:03:50.219 --> 00:03:52.340 And, of course, if you start getting calls or 00:03:52.340 --> 00:03:54.620 letters from a debt collector specifically about 00:03:54.620 --> 00:03:56.900 your federal student loan, that's another major 00:03:56.900 --> 00:03:59.610 indicator. And the consequences go beyond just 00:03:59.610 --> 00:04:01.449 the benefit cuts, right? Oh, absolutely. The 00:04:01.449 --> 00:04:04.169 sources are clear. Default can lead to wage garnishment, 00:04:04.469 --> 00:04:07.210 losing eligibility for any future federal student 00:04:07.210 --> 00:04:10.349 aid, and, yeah, serious long -term damage to 00:04:10.349 --> 00:04:12.430 your credit score. It really can impact your 00:04:12.430 --> 00:04:14.870 financial life quite broadly. OK, this definitely 00:04:14.870 --> 00:04:17.370 sounds serious. So if someone gets one of these 00:04:17.370 --> 00:04:19.930 notices, a letter about an offset, or that demand 00:04:19.930 --> 00:04:22.829 letter, what's the absolute number one thing 00:04:22.829 --> 00:04:25.689 they need to do based on this guidance? The message 00:04:25.689 --> 00:04:28.800 from the sources couldn't be clearer. Do not 00:04:28.800 --> 00:04:32.819 ignore it. Ignoring official notices about defaulted 00:04:32.819 --> 00:04:35.480 federal loans or potential offsets, that's pretty 00:04:35.480 --> 00:04:37.040 much the worst thing you can do. It just makes 00:04:37.040 --> 00:04:39.180 everything harder down the line. Right. Ignoring 00:04:39.180 --> 00:04:41.459 it won't make it go away. So, okay, they've got 00:04:41.459 --> 00:04:43.680 the notice. They're not ignoring it. What's the 00:04:43.680 --> 00:04:45.800 immediate action plan laid out in the sources? 00:04:46.000 --> 00:04:49.370 First step, verification. Log in to studentaid 00:04:49.370 --> 00:04:52.230 .gov. You need to confirm, yes, these are federal 00:04:52.230 --> 00:04:55.209 loans, confirm they are actually listed as defaulted, 00:04:55.389 --> 00:04:58.350 and figure out exactly who holds the loan now, 00:04:58.470 --> 00:05:01.029 is it the Department of Ed directly, or a specific 00:05:01.029 --> 00:05:03.350 collection agency. Okay, get the facts straight 00:05:03.350 --> 00:05:07.029 first. Contact that loan holder or debt collector 00:05:07.029 --> 00:05:09.509 immediately. That's your first point of contact. 00:05:09.850 --> 00:05:11.930 And be ready to talk about your financial situation. 00:05:12.110 --> 00:05:14.769 Be open. The goal really is to ask, what are 00:05:14.769 --> 00:05:16.889 my options to get this loan out of default and 00:05:16.889 --> 00:05:19.170 stop this offset? Makes sense. So what are those 00:05:19.170 --> 00:05:21.389 options? What pathways out of default do the 00:05:21.389 --> 00:05:24.050 sources mention? There are primarily two main 00:05:24.050 --> 00:05:26.449 routes described. The first is loan rehabilitation. 00:05:27.129 --> 00:05:28.949 This one often gets highlighted because if you 00:05:28.949 --> 00:05:31.470 complete it successfully, the default status 00:05:31.470 --> 00:05:33.430 actually gets removed from your credit report. 00:05:33.550 --> 00:05:35.709 It's like a cleaner slate. It usually involves 00:05:35.709 --> 00:05:38.389 making nine affordable voluntary payments over 00:05:38.389 --> 00:05:41.569 10 consecutive months. Finish that and the offset 00:05:41.569 --> 00:05:44.019 stops. OK, rehabilitation sounds like a good 00:05:44.019 --> 00:05:46.240 path, if possible. What's the other main one? 00:05:46.579 --> 00:05:49.259 The other big one is loan consolidation. This 00:05:49.259 --> 00:05:51.639 means you combine your defaulted federal loans 00:05:51.639 --> 00:05:54.420 into a totally new direct consolidation loan. 00:05:54.980 --> 00:05:57.540 The advantage, it gets the loans out of default 00:05:57.540 --> 00:06:00.079 status immediately and stops collections like 00:06:00.079 --> 00:06:02.899 offsets right away. But the catch is you usually 00:06:02.899 --> 00:06:05.939 have to agree to repay this new consolidated 00:06:05.939 --> 00:06:08.959 loan under an income driven repayment plan, an 00:06:08.959 --> 00:06:11.629 IDR plan. So faster resolution, but maybe tied 00:06:11.629 --> 00:06:14.089 to a specific repayment plan. Exactly. And of 00:06:14.089 --> 00:06:15.730 course, the sources also mentioned the obvious. 00:06:16.170 --> 00:06:18.889 Paying the loan in full stops everything. And 00:06:18.889 --> 00:06:22.009 maybe, just maybe, in some less common situations 00:06:22.009 --> 00:06:24.750 for federal loans, negotiating a settlement for 00:06:24.750 --> 00:06:26.470 less than the full amount could be on the table. 00:06:26.730 --> 00:06:29.129 What if someone thinks there's a mistake? Like, 00:06:29.269 --> 00:06:31.290 this isn't my debt or the amount is wrong. Can 00:06:31.290 --> 00:06:34.029 they fight the offset itself? Yes, definitely. 00:06:34.569 --> 00:06:36.769 The sources say you have the right to dispute. 00:06:37.259 --> 00:06:39.819 If you believe the debt isn't yours or the amount 00:06:39.819 --> 00:06:42.120 is off, or maybe you have a valid defense like 00:06:42.120 --> 00:06:44.680 the school closed or there was false certification 00:06:44.680 --> 00:06:47.379 involved, you can dispute the offset. You need 00:06:47.379 --> 00:06:49.540 to follow the specific instructions on the notice 00:06:49.540 --> 00:06:52.800 you received. The material also mentions, though 00:06:52.800 --> 00:06:55.459 maybe in limited cases, you can request a hearing 00:06:55.459 --> 00:06:57.600 to challenge an administrative wage garnishment, 00:06:57.819 --> 00:06:59.680 which includes these Social Security offsets. 00:07:00.300 --> 00:07:02.980 Okay. Now, are there any specific lifelines or 00:07:02.980 --> 00:07:05.579 considerations mentioned just for older borrowers 00:07:05.579 --> 00:07:07.839 or those with disabilities? They seem particularly 00:07:07.839 --> 00:07:09.920 vulnerable. Yes, there's a very important one 00:07:09.920 --> 00:07:12.399 highlighted, the total and permanent disability 00:07:12.399 --> 00:07:15.759 TPD discharge. The criteria, as laid out in the 00:07:15.759 --> 00:07:18.759 sources, involve being unable to engage in any 00:07:18.759 --> 00:07:21.879 substantial gainful activity basically significant 00:07:21.879 --> 00:07:24.459 work for pay because of a physical or mental 00:07:24.459 --> 00:07:26.839 impairment and that impairment has to be expected 00:07:26.839 --> 00:07:29.439 to last for at least 60 months so five years 00:07:29.439 --> 00:07:31.899 or be expected to result in death and if you 00:07:31.899 --> 00:07:34.439 meet those criteria what happens a successful 00:07:34.439 --> 00:07:37.399 tpd discharge can completely wipe out your federal 00:07:37.399 --> 00:07:40.860 student loan debt gone The sources explain you 00:07:40.860 --> 00:07:43.959 can apply through disabilitybenefits .gov or 00:07:43.959 --> 00:07:45.939 sometimes by providing proof from the Social 00:07:45.939 --> 00:07:48.240 Security Administration, like an award letter 00:07:48.240 --> 00:07:50.540 showing a long review period or documentation 00:07:50.540 --> 00:07:52.439 from your doctor. That sounds like a critical 00:07:52.439 --> 00:07:54.839 option for those who qualify. Absolutely. And 00:07:54.839 --> 00:07:56.899 it's worth repeating, even if a full discharge 00:07:56.899 --> 00:07:59.959 isn't possible, those income -driven repayment 00:07:59.959 --> 00:08:02.720 plans we mentioned... After you rehabilitate 00:08:02.720 --> 00:08:05.699 or consolidate, an IDR plan can lead to really 00:08:05.699 --> 00:08:07.779 low payments, sometimes even zero dollars per 00:08:07.779 --> 00:08:10.060 month if your income is low enough compared to 00:08:10.060 --> 00:08:12.300 your family size. That's also in the material. 00:08:13.079 --> 00:08:15.439 So there are ways to manage even if discharge 00:08:15.439 --> 00:08:18.000 isn't an option. Thinking preventively now or 00:08:18.000 --> 00:08:20.480 just managing loans better going forward, what 00:08:20.480 --> 00:08:22.899 proactive steps do the sources recommend? How 00:08:22.899 --> 00:08:25.560 can people avoid getting into this mess? Several 00:08:25.560 --> 00:08:29.680 key things come up. Number one, keep your information 00:08:29.680 --> 00:08:32.240 current. If your loans aren't in default, tell 00:08:32.240 --> 00:08:34.940 your loan servicer about any changes. Income, 00:08:35.259 --> 00:08:37.539 family size, disability status, and especially 00:08:37.539 --> 00:08:40.220 your contact info. If you're receiving benefits, 00:08:40.659 --> 00:08:43.000 keep the SSA updated too. If they can't reach 00:08:43.000 --> 00:08:45.460 you, they can't help you before things escalate. 00:08:45.960 --> 00:08:48.320 Seems basic, but probably crucial. What else? 00:08:48.580 --> 00:08:51.870 Keep records. meticulous records, copies of everything, 00:08:52.190 --> 00:08:54.309 letters, payment confirmations, notices. This 00:08:54.309 --> 00:08:57.090 stuff is gold if there's ever a dispute. Also, 00:08:57.389 --> 00:08:59.309 regularly check your loan statements and your 00:08:59.309 --> 00:09:01.250 Social Security benefit statements. Look for 00:09:01.250 --> 00:09:04.049 anything unusual. Catch problems early. And finally, 00:09:04.210 --> 00:09:06.269 the sources really emphasize seeking help from 00:09:06.269 --> 00:09:08.789 reputable places if you're struggling. Nonprofit 00:09:08.789 --> 00:09:11.149 credit counselors or student loan advisors, not 00:09:11.149 --> 00:09:13.289 just random companies promising quick fixes. 00:09:13.649 --> 00:09:15.919 Good advice. Let's zoom out for a second. What 00:09:15.919 --> 00:09:17.659 about the bigger picture, the policy context 00:09:17.659 --> 00:09:19.700 here? The sources touch on that too, right? They 00:09:19.700 --> 00:09:22.679 do. And the numbers are pretty stark. The material 00:09:22.679 --> 00:09:24.440 mentions that the number of people having their 00:09:24.440 --> 00:09:26.940 Social Security garnished for student loans jumped 00:09:26.940 --> 00:09:31.639 massively from about 6 ,200 back in 2001 to nearly 00:09:31.639 --> 00:09:36.620 192 ,300 by 2019. And the estimate now is that 00:09:36.620 --> 00:09:39.639 around 4 million borrowers are behind on payments 00:09:39.639 --> 00:09:42.120 and could be at risk of default later this year. 00:09:42.299 --> 00:09:45.220 That's a huge number. Wow. And there's a debate 00:09:45.220 --> 00:09:47.240 about whether this should even be happening according 00:09:47.240 --> 00:09:49.419 to the material. Yes, it presents both sides. 00:09:49.940 --> 00:09:52.120 On one hand, advocates argue that taking Social 00:09:52.120 --> 00:09:54.059 Security benefits, which are meant for basic 00:09:54.059 --> 00:09:56.019 living expenses in retirement or disability, 00:09:56.759 --> 00:09:58.259 kind of undermines the whole point of student 00:09:58.259 --> 00:09:59.940 loans, which were supposed to improve financial 00:09:59.940 --> 00:10:01.799 stability, right? Right. It seems contradictory. 00:10:02.159 --> 00:10:04.679 It does feel that way to some. The counterargument 00:10:04.679 --> 00:10:08.360 presented is, well, more straightforward. A debt 00:10:08.360 --> 00:10:11.179 is a debt. Student loans are owed to the government, 00:10:11.340 --> 00:10:13.320 and the government needs tools to collect what 00:10:13.320 --> 00:10:16.190 it's owed. just like any other debt. And that 00:10:16.190 --> 00:10:18.590 policy decision we discussed earlier reinstating 00:10:18.590 --> 00:10:22.350 collections in 2019 and setting the $750 minimum 00:10:22.350 --> 00:10:25.049 that's presented as a clear example of prioritizing 00:10:25.049 --> 00:10:27.870 debt recovery, perhaps over a higher level of 00:10:27.870 --> 00:10:30.129 benefit protection. So wrapping this up, what's 00:10:30.129 --> 00:10:32.610 the main takeaway from this deep dive into social 00:10:32.610 --> 00:10:35.269 security cuts and defaulted student loans? It 00:10:35.269 --> 00:10:37.610 seems like a really tough situation. It is a 00:10:37.610 --> 00:10:39.629 serious challenge, no doubt, especially for vulnerable 00:10:39.629 --> 00:10:42.429 groups. But the overwhelming message from these 00:10:42.429 --> 00:10:44.789 sources is that it's not hopeless. You're not 00:10:44.789 --> 00:10:47.409 helpless. Okay. Yeah, the key really seems to 00:10:47.409 --> 00:10:49.929 be understanding your rights, knowing the warning 00:10:49.929 --> 00:10:52.509 signs, acting fast if you get a notice, and really 00:10:52.509 --> 00:10:55.629 digging into those options. Rehabilitation, consolidation, 00:10:55.990 --> 00:10:58.610 maybe DPD discharge. The sources make it clear 00:10:58.610 --> 00:11:00.649 there are concrete steps you can take to protect 00:11:00.649 --> 00:11:02.950 those essential social security benefits and 00:11:02.950 --> 00:11:05.289 work your way out of default. Knowledge and quick 00:11:05.289 --> 00:11:07.799 action are your best tools here. And that brings 00:11:07.799 --> 00:11:10.159 us to a final thought, maybe something for you, 00:11:10.179 --> 00:11:11.980 the listener, to consider based on all this. 00:11:12.340 --> 00:11:15.279 Think about that policy shift, lowering the protected 00:11:15.279 --> 00:11:17.820 benefit amount from potentially over $1 ,800 00:11:17.820 --> 00:11:22.279 down to just $750. What does that specific choice 00:11:22.279 --> 00:11:24.639 really signal about how we balance recovering 00:11:24.639 --> 00:11:26.919 government debt against protecting the basic 00:11:26.919 --> 00:11:29.200 financial stability provided by social safety 00:11:29.200 --> 00:11:32.539 nets like Social Security? It's a really fundamental 00:11:32.539 --> 00:11:34.860 question about priorities raised directly by 00:11:34.860 --> 00:11:37.529 the information we've discussed. If you found 00:11:37.529 --> 00:11:39.789 this deep dive into Social Security benefit cuts, 00:11:40.269 --> 00:11:42.110 your guide to defaulted student loans helpful, 00:11:42.289 --> 00:11:44.590 you can find more information, resources, and 00:11:44.590 --> 00:11:46.950 strategies like the ones we discussed by subscribing 00:11:46.950 --> 00:11:48.710 to the Financial Freedom Insights newsletter 00:11:48.710 --> 00:11:50.970 mentioned in our sources. And please, share this 00:11:50.970 --> 00:11:52.830 deep dive with your network. Let's help grow 00:11:52.830 --> 00:11:54.649 this community of informed people navigating 00:11:54.649 --> 00:11:55.990 these important financial issues.