Personal Finance

Social Security checks may be smaller for some as garnishments begin

Published

3 days ago

June 1, 2025

T-studios2 | E+ | Getty Images

Some Social Security beneficiaries may find their June check is smaller: Starting this month, a share of people’s benefits can be garnished if they’ve defaulted on their student loans.

The Trump administration announced on April 21 that the U.S. Department of Education would resume collection activity on the country’s $1.6 trillion student loan portfolio. For nearly half a decade, the government did not go after those who’d fallen behind as part of Covid-era policies.

More than 450,000 federal student loan borrowers age 62 and older are in default on their federal student loans and likely to be receiving Social Security benefits, the Consumer Financial Protection Bureau found.

Depending on details like their birth date and when they began receiving benefits, their monthly Social Security check may arrive June 3, 11, 18 or 25, according to the Social Security Administration.

Many Social Security recipients rely on those checks for most, if not all, of their income. So people who are facing a smaller federal benefit as a result of garnishment are likely in a panic, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.

But, Nierman said, “the good news is there are multiple options for borrowers to stop those payment offsets.”

Here’s what you need to know if you’re at risk of a smaller benefit.

How to challenge the garnishment

Federal student borrowers should have received at least a 30-day warning before their Social Security benefit is offset, said higher education expert Mark Kantrowitz.

That notice should include information on whom to contact in order to challenge the collection activity, Kantrowitz said. (The alert was likely sent to your last known address, so borrowers should make sure their loan servicer has their correct contact information.)

You may be able to prevent or stop the offset if you can prove a financial hardship or have a pending student loan discharge, Kantrowitz added.

With that in mind, your next step may be pursuing a discharge with your student loan servicer. That’s more likely in circumstances where you have significant health challenges.

“If they are sick or disabled, they can file for a Total & Permanent Disability discharge,” Nierman added.

Borrowers may qualify for a TPD discharge if they suffer from a mental or physical disability that is severe and permanent and prevents them from working. Proof of the disability can come from a doctor, the Social Security Administration or the Department of Veterans Affairs.

Get current on your loans

Another route to stop the offset of Social Security benefits is getting current on the 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.

Student loan default collection restarting

Offset is limited to 15%

Social Security recipients can typically see up to 15% of their monthly benefit reduced to pay back their defaulted student debt, but beneficiaries need to be left with at least $750 a month, experts said.

The offset cap is the same “regardless of the type of benefit,” including retirement and disability payments, said Kantrowitz.

The 15% offset is calculated from your total benefit amount before any deductions, such as your Medicare premium, Kantrowitz said.

When Social Security benefit isn’t enough

Many retirees worry about meeting their bills on a fixed income — with or without facing garnishment, experts said.

Utilizing other relief options may help stretch your funds while you work on stopping the offset to your Social Security benefits.

For example, there are a number of charitable organizations that assist seniors with their health-care costs. At Copays.org you can apply for funds to put toward copays, premiums, deductibles and over-the-counter medications.

The National Patient Advocate Foundation has a financial resource directory in which you can search for local aid for everything from dental care to end-of-life services.

Many older people aren’t taking advantage of all the food assistance available to them, experts say. A 2015 study, for instance, found that less than half of eligible seniors participated in the Supplemental Nutrition Assistance Program, or SNAP.

The extra money can go a long way for retirees on a fixed income, though. The maximum benefit a month for a household of one is $292. Grocery stores, online retailers and farmers markets accept the funds.

Personal Finance

Why on-time debt payments may not boost your credit score

Published

2 hours ago

June 4, 2025

Business Finance News

Asiavision | E+ | Getty Images

Americans have a near-record level of credit card debt — $1.18 trillion as of the first quarter of 2025, according to the Federal Reserve Bank of New York. The average credit card debt per borrower was $6,371 during that time, based on data from TransUnion, one of the three major credit reporting companies.

Many people don’t understand why a common strategy that can help them pay down that debt — paying bills on time — isn’t all it takes to improve their credit. Separating fact from fiction is essential to help you pay down debt and raise your credit score.

Here’s the truth behind a common credit myth:

Myth: Paying bills on time ensures a high credit score.

Fact: Your payment history is critical to your credit score. However, not all bill payments are treated equally, and making them on time isn’t all that counts.

Your credit score is a three-digit numerical snapshot, typically ranging from 300 to 850, that lets lenders know how likely you are to repay a loan. The average American’s score is 715, according to February data from scoring brand FICO.

Here’s what you need to know about on-time payments and your credit:

Not all debt payments factor into credit scores

“You may be paying rent-to-own, private school tuition, utilities, or internet payments on time every month, and you think it helps your credit score,” said Yanely Espinal, director of educational outreach for financial literacy nonprofit Next Gen Personal Finance. “But a lot of these are not traditional payment types and are not reported to the credit bureaus — so there’s no impact.”

For example, making on-time payments on buy now, pay later, or BNPL, loans may not help your credit score, even though 62% of BNPL users incorrectly believe they will, according to a new LendingTree survey.

More from Your Money:

Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

While some BNPL providers do report certain loans to the credit bureaus, this is not a universal practice. And BNPL users may see a negative credit impact if they fall behind.

“Some BNPL lenders will report missed payments, which can hurt your score,” said Matt Schulz, chief consumer finance analyst at LendingTree and author of “Ask Questions, Save Money, Make More.”

An easy way to check what payments are and aren’t influencing your credit: take a look at your credit report. You can pull it for free, weekly, for each of the major credit reporting agencies at Annualcreditreport.com.

‘Go for the A+’ on credit usage

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While payment history can account for 35% of your score, according to FICO, it’s not the only factor that matters. How much you owe relative to how much credit you have available to you — known as your “credit utilization” — is almost as important, at about 30% of your score.

Higher utilization can hurt your score. Aim to use less than 30% of your available credit across all accounts, credit experts say, and keep it below 10% if you really want to improve your credit score.

A 2024 LendingTree study found that consumers with credit scores of 720 and up had a utilization rate of 10.2%, compared with 36.2% for those with credit scores of 660 to 719.

“Don’t settle for B+ when you can go for the A+,” said Espinal, who is also the author of “Mind Your Money” and a member of the CNBC Global Financial Wellness Advisory Board. “You want to use less than 10% to really boost your score significantly.”

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Personal Finance

Social Security Fairness Act benefit increases arrive for pensioners

Published

4 hours ago

June 4, 2025

Business Finance News

A Social Security Administration (SSA) office in Washington, DC, March 26, 2025.

Saul Loeb | Afp | Getty Images

The Social Security Administration has now processed about 91% of cases related to a new law that is prompting higher benefits and lump-sum retroactive payments for nearly 3 million people, according to a new update from the agency.

The Social Security Fairness Act, which was signed into law in January, eliminated two provisions — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO — that previously reduced benefits for individuals who also receive income from public pensions that did not require the payment of Social Security payroll taxes.

At the start of the year, the Social Security Administration said affected beneficiaries may have to wait more than one year to see their payments adjusted.

The agency credits automation for helping it to expedite those payments.

The Social Security Administration currently plans to update all beneficiary records affected by the law by early November.

However, the agency is “working to exceed its estimate” under new commissioner Frank Bisignano, a Social Security Administration official said via email.

“Commissioner Bisignano committed to senators during his confirmation process that this would be finished ‘while the weather is warm’ and he will keep his promise,” the Social Security Administration official said.

Here’s the latest on the Fairness Act payments.

Who does the Social Security Fairness Act affect?

The Social Security Fairness Act, which was signed into law on Jan. 5, affects certain individuals who are eligible for Social Security benefits, but who also receive pensions from work that did not require the payment of Social Security payroll taxes.

Examples of those affected include teachers, firefighters and police officers; federal employees covered by the Civil Service Retirement System; and people who are covered by a foreign social security system, according to the Social Security Administration.

Notably, not everyone in those groups will receive a benefit increase, according to the agency. About 72% of state and local public employees pay Social Security taxes, and therefore were not affected by the new law, according to the agency.

What you need to know about Social Security

The provisions that had previously been in place reduced Social Security benefits for more than 2.8 million people, according to SSA. To date, the agency has processed about 2.5 million cases, the agency said in its latest update.

Railroad Retirement Board beneficiaries also stand to receive adjusted annuity payments because of the law. New monthly annuity amounts for most individuals will begin in July, and one-time retroactive payments are due to arrive by the end of July, according to a Railroad Retirement Board spokeswoman.

How much are the benefit increases?

Individuals affected may see monthly Social Security check increases ranging from “very little” to more than $1,000 per month, according to SSA.

The changes will result in higher monthly payments ranging from $360 to $1,190, depending on individual circumstances, the Congressional Budget Office previously estimated.

Affected beneficiaries will also see lump-sum payments dating back as far back as January 2024. Notably, Social Security benefit payments for January 2024 were received by beneficiaries in February 2024, according to the Social Security Administration.

For each beneficiary, the monthly benefit increases and any back payments are processed together, the Social Security official said.

Who is still waiting for benefit adjustments?

The Social Security Administration is now prioritizing the remaining complex cases that could not be automated, according to the Social Security official.

Those cases require additional time to manually update records to process both the retroactive and new benefits.

The roughly 300,000 individuals who are still waiting may have unique circumstances, notes David A. Weaver, a former Social Security Administration executive who currently teaches statistics at the University of South Carolina.

For example, some eligible beneficiaries who have recently died may qualify for the lump-sum retroactive payments, Weaver said. In those circumstances, the Social Security Administration would likely try to issue that money to survivors.

Others may be affected by overpayments, whereby the Social Security Administration issued benefit payments that were too high. In those cases, the agency will generally seek reimbursement for the excess sums that were issued.

In addition to the cases that require manual processing, there are people who are now newly eligible to apply for Social Security benefits as a result of the law, Weaver said.

Those individuals may need to file an application, according to the Social Security Administration. The date of the application may determine benefit start date and benefit amount.

What could happen next?

As the implementation of the Social Security Fairness Act moves to completion, it may be wise for Congress to ask the Government Accountability Office to audit that process, Weaver said.

That may allow for an evaluation of the final administrative costs for processing the benefit changes due to the law, including both the manual cases and additional new claims, as well as phone calls from the public about the changes, he said.

That investigation could also evaluate whether other agency work was sidelined as the benefit changes were processed, he said.

Have your Social Security benefits been affected by the Social Security Fairness Act? If you would be willing to share your story, email [email protected].

Personal Finance

Trump’s tax bill could end ‘SALT’ workaround for some businesses

Published

4 hours ago

June 4, 2025

Business Finance News

Speaker of the House Mike Johnson, R-La., speaks to the media after the House narrowly passed a bill forwarding President Donald Trump’s agenda at the Capitol on May 22, 2025.

Kevin Dietsch | Getty Images

As Senate Republicans debate trillions of tax breaks advanced by the House, some business owners could be blocked from part of the proposed windfall, policy experts say.

If enacted as written, the House GOP’s “One Big Beautiful Bill Act” would raise the federal deduction limit for state and local taxes, known as SALT, to $40,000. That would phase out once income exceeds $500,000.

The bill would also boost a tax break for pass-through businesses, known as the qualified business income, or QBI, deduction, to 23%. But the measure would end a popular state-level SALT cap workaround for certain pass-through business owners.

Here’s what to know about the proposed change and who could be impacted.

SALT deduction cap ‘workaround’

Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there’s currently a $10,000 limit on the SALT deduction for filers who itemize tax breaks. This cap will expire after 2025 without changes from Congress. The SALT deduction was unlimited before TCJA, but the so-called alternative minimum tax reduced the benefit for some higher earners.

The cap has been a pain point in high-tax states like New York, New Jersey and California because residents can’t deduct more than $10,000 for SALT, which includes income, property and sales taxes.

However, most states now have a “workaround” to bypass the federal SALT deduction limit for pass-through business owners, explained Garrett Watson, director of policy analysis at the Tax Foundation.

As of May 9, some 36 states and one locality, New York City, have enacted a workaround — the pass-through entity, or PTE, level tax — since the 2017 TCJA limitation, according to the American Institute of Certified Public Accountants, or AICPA.

While each state has different rules, the strategy generally involves paying individual state and local taxes through a pass-through business to sidestep the $10,000 cap, Watson said. Owners can then deduct their share of SALT paid.

How the SALT workaround could change

Certain white-collar professionals — doctors, lawyers, accountants, financial advisors and others — known as a “specified service trade or business,” or SSTB, can’t claim the qualified business income deduction once income exceeds certain limits.

As advanced, the House bill would block SSTBs from using the SALT deduction workaround, which would be “substantial” for those impacted, Watson said.

Meanwhile, some non-SSTB pass-through businesses would have two benefits under the House-approved bill. Depending on income, they could qualify for the bigger 23% QBI deduction. They could also still claim an unlimited SALT deduction via the PTE workaround, experts say.

Hidden cost of Republican tax bill: Here's what to know

The revised provision has faced some pushback among certain organizations.

“This loophole is likely expensive, and lawmakers and the public should demand a clear accounting of the fiscal cost to bless workarounds for this favored group,” New York University Tax Law Center deputy director Mike Kaercher said in a statement after the revised House bill text was released in late May.

Some industry groups, such as AICPA, have urged the Senate to maintain the SALT deduction workaround for SSTBs.

If the House bill is enacted as written, SSTBs would be “unfairly economically disadvantaged” by existing as a certain type of business, AICPA wrote in a May 29 letter to the Senate.

Since many SSTBs can’t organize as a C corporation, there’s “no option to escape the harsh results of the SSTB distinction,” which could limit these professionals’ SALT deduction, AICPA wrote.