Suze Orman warns Americans on sudden Social Security problem | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

American workers recognize that Social Security will be an important source of financial assistance for their everyday expenses during retirement.

Bestselling author and former CNBC personal finance editor Suze Orman often highlights the necessity of grasping key aspects of retirement planning to build a stable future.

She now issues a significant warning to Americans about Social Security, citing a recent development that poses a serious risk to many retirees’ monthly income.

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Orman has always stressed the importance of timing when it comes to Social Security benefits. Although American workers have the option to start collecting at age 62, she explains that those who do so then end up significantly reducing their monthly payments.

To receive their full benefits, individuals must wait until their designated retirement age, which is 67 for those born in 1960 or later.

Orman strongly encourages delaying benefits even further, up to age 70, for those who can afford to do so. She argues that waiting allows payments to grow, ensuring a more substantial financial cushion during retirement.

She cautions that claiming benefits too early is a costly mistake, as it prevents individuals from maximizing their monthly income.

But now, Orman has a new warning on Social Security — and this one involves a change in government policy regarding repayment of student loans.

Personal finance author Suze Orman is pictured. The bestselling author and former CNBC television personality warns Americans about a major change to the student loan program and how it might affect their Social Security payments.

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Suze Orman warns Americans that their Social Security paychecks can be reduced

During the past five years, the federal government has refrained from pursuing repayment from individuals who have defaulted on federal student loans (including reduced Social Security checks).

However, that policy shifted in early May when officials announced the reinstatement of various methods to recover outstanding college debt through the Treasury Offset Program.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said U.S. Secretary of Education Linda McMahon in an April 12 Department of Education statement.

Starting in May, the government began intercepting federal tax refunds from borrowers in default, applying those funds toward their unpaid loan balances.

More on retirement:

“Beginning in June, Social Security benefits can be seized to offset college debt in default,” wrote Orman in an email newsletter, also noting that this may be something parents who borrowed under the federal PLUS loan program ought to be concerned about.

“Later this summer, the government has announced it plans to send out notices that it will also garnish wages,” Orman added. “Up to 15% of after-tax income can be seized to pay down defaulted student loans.”

Orman explains that approximately five million borrowers are already in default, meaning they are directly affected by the government’s decision to resume collection efforts.

She also highlights the fact that another four million borrowers are struggling to keep up with payments and are approaching the 270-day mark of non-payment — the point at which their loans officially transition from delinquent to default.

Orman stresses the urgency of the situation, warning that those on the brink of default could soon face serious financial consequences if they don’t take action.

Suze Orman explains steps to avoid Social Security payment reductions

In order to avoid reduced Social Security benefits, Orman advises borrowers to first verify their payment status to stay informed about their federal student loans.

She explains that every borrower has a Federal Student Aid ID number, which they can use to access their account on the Federal Student Aid website.

Through this dashboard, they can review their payment history, check for any outstanding balances, and identify their loan servicer — the company responsible for handling their loan repayments on behalf of the government. Orman emphasizes the importance of keeping their contact information updated with the loan servicer.

“I hope everyone with student debt will stand in their truth and look into their status and make it a priority to restart payments with a loan repayment plan,” Orman wrote.

“Ignoring that this is happening or thinking you can hide from the government debt collectors will only make things worse.”