Some student-loan borrowers who fall behind on payments risk losing their Social Security benefits. 33 Democratic lawmakers want that 'devastating practice' to end.

• A group of Democrats called for an end to the withholding of Social Security benefits for defaulted student-loan payments.

• When a borrower falls behind on payments, the government can seize benefits to recoup the funds.

• The lawmakers said this practice puts at risk older borrowers who rely on the benefits.

A group of Democratic lawmakers want to end a consequence some student-loan borrowers face when they fall behind on payments.

On Wednesday, Sens. Elizabeth Warren and Ron Wyden, along with Reps. Ayanna Pressley, Pramila Jayapal, Raúl Grijalva, and John Larson, led 27 of their colleagues in urging President Joe Biden's administration to stop withholding Social Security benefits for defaulted borrowers.

Specifically, in their letter to Social Security Administration Commissioner Martin O'Malley, Treasury Secretary Janet Yellen, and Education Secretary Miguel Cardona, the lawmakers referenced the Treasury Offset Program, which allows the government to withhold a portion of a borrower's Social Security benefits to pay for their defaulted student loans.

It's a "particularly devastating practice for seniors and people with disabilities who rely on Social Security as their sole source of income," the letter said.

The government can withhold up to 15% of Social Security benefits each month under the offset program's guidelines, and the lawmakers said that there's "little evidence that these offsets are a meaningful solution to collecting outstanding debt."

"Almost a third of borrowers 50 and older who had offsets lasting five years or longer had their loan balances increase during this time period," they said. "And more than 70 percent of the loan repayments collected through Social Security offsets were applied to fees and interest."

According to an analysis by the think tank New America, 3.5 million Americans aged 60 and over have about $125 billion in student loans. Many of those borrowers rely on Social Security as additional income, and given they still have student-loan balances later in life, they have likely struggled to afford to pay off their loans.

Business Insider has previously reported on the financial strains many American retirees face. A recent report from Sen. Bernie Sanders found that 38% of Americans over the age of 65 would be in poverty if they did not have Social Security income, based on data from the Center on Budget and Policy Priorities.

Additionally, while the student-loan payment pause ended in October, the Education Department implemented a 12-month "on-ramp" period, during which any missed payments would not be negatively reported but interest would still accrue on borrowers' balances. During this time, older borrowers will be protected from having their federal benefits withheld, but upon the on-ramp's expiration later this year, that will no longer be the case.

Biden's administration has not yet commented on whether it will consider ending the practice of withholding benefits for those who fall behind on student-loan payments.

"Offsetting Social Security benefits can push beneficiaries closer to—or even into—poverty, undermining the Social Security Act's mission of providing for 'the general welfare,' basic economic security, and the well-being of vulnerable Americans," the lawmakers said. "Accordingly, we urge you to explore exempting Social Security retirement, survivor, and disability benefits from administrative offset due to student loan debt."

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