If you borrow for college with federal student loans and you fail to repay them, you should know that the federal government may reduce your annual Social Security income by an average of $2,500. We say “may” because there are scenarios where you can have federal student loans discharged due to disability without impacting your federal benefits payments. Additionally, there are limits to how much the government may garnish your Social Security benefits.

While defaulting on private student loans won’t result in a loss of Social Security income, private student loan companies can sue you and get their money back that way. This guide goes over how defaulting on student loans can impact your retirement and steps that you can take to avoid student loan garnishment completely.

How Student Loan Default Affects Your Social Security Benefits

When you default on federal student loans, you should know the government will find a way to get their money back and make your finances much more difficult to manage until they do. For example, you can get sued and have your wages garnished at work—but that’s far from the extent of it.

According to the U.S. Department of Education, defaulting on student loans can also lead you to have your tax refunds and federal benefits payments (like Social Security payments) withheld and applied to your defaulted loans through a process called Treasury Offset.

According to Federal Student Aid, you’ll get a notice of the intent to offset at your last known address once the offset is scheduled to begin in 65 days. This garnishment will take place from there until your unpaid debts are entirely paid off or until the default status on your federal student loans has been removed.

Social Security Garnishment Limit

This limit is set at 15% of your federal benefits payments, which the Center for Retirement Research at Boston College believes could leave current and future retirees with 4% to 6% less in retirement income than they would otherwise have.

How to Stop Social Security Garnishment for Student Loans

According to the U.S. Department of Education, borrowers have the option of entering into a repayment agreement to stop garnishment of Social Security payments due to nonpayment of federal student loans, so long as a first payment is made within 65 days and regularly scheduled payments are made thereafter.

If your federal student loans are in default but you have not yet received a 65-day notice letter for Social Security payment garnishment, you can also look into the Fresh Start program to help you get your loan payments back on track. This U.S. Department of Education program lets you get your defaulted loans back into “in repayment” status and removes the default record from your credit reports.

You can also get access to federal student aid benefits again through this program, but you’ll only continue qualifying if you make agreed-upon payments on your federal student loans.

How to Request Social Security Garnishment Hardship

The U.S. Department of Education says you have the legal right to request a review of your account to prevent the Treasury Offset from occurring. According to Tate Law, this could be an option if your income is low and you’re living near the poverty line.

Tate Law suggests finding out whether your loan is with the Education Department or a guaranty agency by calling the Default Resolution Group at 1-800-621-3115. From there, you can request a hardship packet that lets you apply for an exception based on your financial status. Once you complete the hardship application and submit proof of household income and expenses along with a copy of the notice of the offset, you will typically hear back with a decision within six to eight weeks.

The Bottom Line

Not paying your student loans won’t end well, and that is especially true if you never have any plans to get back on track. You could not only suffer damage to your credit score and wages at your job being withheld but also have your future Social Security benefits garnished.

Fortunately, there are loan repayment plans that can benefit borrowers with a low income. In fact, income-driven repayment (IDR) plans for federal student loans can come with a monthly payment as low as $0 for those who qualify.