WASHINGTON–Credit unions will need to watch for another group of members feeling new financial strains—seniors—as in less than three weeks, a 50% clawback rate on Social Security overpayments will officially begin.

Some credit unions may find members reaching out and asking for direction and guidance, as Social Security beneficiaries who’ve been overpaid try to sort through the options available to them, including, in some cases, waivers or reductions in the amount they’ll be required to repay.

Beginning July 24, a Social Security policy adjustment instituted under President Trump has the potential to vastly change the monthly payout for more than one-million recipients. 

In March, the SSA announced plans to reinstate a 100% clawback rate in instances where beneficiaries were overpaid, which would have been a sizable increase from the 10% clawback rate instituted under the Biden administration. After backlash, the SSA lowered that figure to 50% of monthly benefits.

What the Data Reveal

Data from KFF and Cox Media group show nearly two-million beneficiaries closed out fiscal year 2023 (the federal government’s fiscal year ends on Sept. 30) owing money to the SSA via overpayment, according to The Motley Fool.

“Furthermore, the SSA’s Office of the Inspector General reported a whopping $23 billion in uncollected overpayments at the end of September 2023,” the report continued. “Collecting these overpayments fits with the Trump administration’s theme of making federal programs more efficient and cutting down on perceived fraud.”

How Overpayments Occur

The overpayments are the result of both errors made by the SSA or recipients themselves not updating their information, such as a change in their income.

“When we determine an individual receiving Title II benefits is overpaid, we send them a notice requesting a full and immediate refund and inform them of their right to request reconsideration or a waiver of recovery,” the SSA said in a recent statement. “We usually provide 90 days for the individual to request a lower rate of withholding, a reconsideration, or waiver.”

Effective July 24, those deemed to have received overpayments can have up to 50% of their funds garnished until the overpayment is settled.

Significant Part of Income

Motley Fool noted that a recent Gallup poll found that a combined 86% rely on Social Security as a “major” or “minor” income source. Though clawbacks apply to all forms of beneficiaries (retirees, survivors of deceased workers, and workers with disabilities.