Social Security beneficiaries are at risk of receiving a smaller benefit if they’ve fallen behind on their student loans.

The Trump administration recently announced it would move to offset defaulted student loan borrowers’ federal benefits, and warned that payments could be garnished as soon as June.

That involuntary collection activity could have serious consequences on those who rely on the benefits to pay most, if not all, of their bills, consumer advocates say.

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There are some 2.9 million people age 62 and older with federal student loans, as of the first quarter of 2025, according to Education Department data. That is a 71% increase from 2017, when there were 1.7 million such borrowers, according to the data.

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

Here’s what borrowers need to know.

The best way to avoid the offset of your Social Security benefits is to get current on your loans, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

You can contact the government’s Default Resolution Group and pursue several different avenues to get out of default, including enrolling in an income-driven repayment plan.

“If Social Security is their only income, their payment under those plans would likely be zero,” Mayotte said.

“Markets go up and down, but students’ goals remain the same,” said Chris McGee, chair of the College Savings Foundation.

In 2024, the number of 529 plan accounts increased to 17 million, up more than 3% percent from the year before, according to Investment Company Institute.

Total investments in 529s rose to $525 billion as of December, up 11% from a year earlier, while the average 529 plan account balance hit a record of $30,961, data from the College Savings Plans Network, a network of state-administered college savings programs, also showed.

“The industry is coming off its best year ever in terms of new inflows,” said Richard Polimeni, head of education savings at ‎Merrill Lynch.

However, “in terms of the current market volatility, that creates some concern,” he added.

Even as concerns over college costs are driving more would-be college students to rethink their plans, college savings accounts are still as vital as ever.

Roughly 42% of students are pivoting to technical and career training or credentialing, or are opting to enroll in a local and less-expensive community college or in-state public school, according to a recent survey of 1,000 high schoolers by the College Savings Foundation. That’s up from 37% last year. 

As a result of those shifting education choices, 69% of students are expecting to live at home during their studies, the highest percentage in three years. 

Despite those adjustments, some recent changes have helped make 529 plans even more worthwhile: As of 2024, families can roll over unused 529 funds to the account beneficiary’s Roth individual retirement account, without triggering income taxes or penalties, so long as they meet certain requirements.

Restrictions have also loosened to allow 529 plan funds to be used for continuing education classes, apprenticeship programs and student loan payments. For grandparents, there is also a new “loophole,” which allows them to fund a grandchild’s college without impacting that student’s financial aid eligibility.

Generally, 529 plans offer age-based portfolios, which start off with more equity exposure early on in a child’s life and then become more conservative as college nears. By the time high school graduation is around the corner, families likely have very little invested in stocks and more in investments like bonds and cash. That can help blunt their losses.

Pay attention to your fund’s approach toward shifting from stocks to bonds, Morris said.

“If you are in a total stock portfolio, you may not want that ride,” she said: “You don’t want to get seasick.”

If the market volatility is still too much to bear, consider adjusting your allocation.

“One strategy is to start de-risking a portion of their portfolio and reallocate a portion into cash equivalent, which will provide a protection of principle while also proving a competitive return and peace of mind,” Polimeni said.

Still, financial experts strongly caution against shifting your entire 529 balance to cash. “The worst thing an investor can do in a down market is panic and sell investments prematurely and lock in losses,” Polimeni said.

Often that is the last resort. In the wake of the 2008 financial crisis, only 10% of investors liquidated their entire 529 accounts, and 20% switched to less risky assets, according to an earlier survey by higher education expert Mark Kantrowitz.

You can get reimbursed from your 529 plan for any eligible out-of-pocket expenses within the same calendar year. “Using that strategy gives another six to seven months for the market to recover,” Polimeni said.

Another option is to tap a federal student loan and take a qualified distribution from the 529 plan to pay off the debt down the road. However, if you’re thinking of taking out private student loans or a personal loan that starts incurring interest immediately, you may want to spend 529 funds first in that case, and defer that borrowing until later.

Once you have a withdrawal plan, you can — and should — keep contributing to your 529, experts say. Not only can you get a tax deduction or credit for contributions, but earnings will grow on a tax-advantaged basis, whether over 18 years or just a few.

“The major advantage is the tax-deferred growth, so the longer you are invested, the more tax-deferred growth you will have,” Polimeni said.

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Debate for the House Republicans’ tax bill is underway — and experts are watching to see which of President Donald Trump’s priorities make the final cut.

The House Ways and Means Committee, which has jurisdiction over tax, released the full text of its portion of the bill Monday afternoon, and started to debate over provisions on Tuesday.

GOP lawmakers included several of Trump’s campaign priorities, including tax cut extensions, no tax on tips and tax-free overtime pay. Rather than cutting taxes on Social Security, the plan includes an extra $4,000 deduction for older Americans.

The early bill did not include a higher tax rate on some of the wealthiest Americans or plans to end the so-called “carried interest loophole,” which are both ideas that Trump supported.  

However, the final bill could change significantly before the committee vote.

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The early version of the GOP tax bill would cost about $3.7 trillion over 10 years, according to estimates from the Joint Committee on Taxation. That’s under the Republicans’ $4.5 trillion limit, which could leave room for other priorities to be added or increased during Tuesday’s negotiations, experts say. 

“It’s really important for any additional tax cuts to be paid for,” which will impact individual provisions, said Shai Akabas, vice president of economic policy for the Bipartisan Policy Center.

As the debate heats up, here are two key areas to watch.

The House text released Monday would boost the SALT deduction limit to $30,000 for most taxpayers. This would phase out once modified adjusted gross income exceeds $400,000.   

Some lawmakers have already pushed a higher SALT deduction cap, which could still be possible with wiggle room in the budget, experts say.    

Republican lawmakers also want to expand the child tax credit, a change that was passed via a bipartisan House bill in February 2024.

TCJA temporarily increased the maximum child tax credit to $2,000 from $1,000 per child under age 17, and boosted eligibility. These changes are scheduled to sunset after 2025.

The preliminary House GOP text calls for raising the credit to $2,500 per child through 2028, as long as both parents have a Social Security number. The $1,400 refundable portion, which is available without taxes owed, would be indexed for inflation.

However, the proposal “does nothing for the 17 million children who currently don’t get the full $2,000 child tax credit because their families’ incomes are too low,” said Chuck Marr, vice president for federal tax policy for the Center on Budget and Policy Priorities.