Across the United States, tens of thousands of children in foster care receive monthly Social Security or Supplemental Security Income (SSI) payments. These funds are not welfare handouts or state assistance. They are federal benefits earned through a parent’s work record, disability status, or death.
Yet, in most states, these payments never reach the children they are meant to support. Instead, state child welfare agencies frequently redirect funds to cover foster care expenses already funded through public budgets. This long-standing practice is now facing severe federal pressure, raising the possibility that dozens of states could be forced to return millions of dollars taken from foster children over the years.
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How Foster Children Qualify for Social Security and SSI
Social Security benefits are commonly associated with retirement, but children can also qualify under several federal programs. Eligibility depends on family circumstances rather than foster care status.
Many foster children receive survivor benefits after a working parent passes away. Others qualify as dependents of parents receiving Social Security Disability Insurance. Children with significant disabilities and minimal financial resources may receive SSI.
These programs were created to provide stability and long-term support. For children in foster care, the benefits are intended to help meet daily needs and, when properly preserved, to provide a financial foundation for housing, education, and basic living costs once they leave state care.
At HHS, our guiding principle is simple: every child deserves a home and a fair chance to thrive. But when state agencies stack the deck against children, we step in.
This week, @ACFHHS notified 39 governors that their states diverts current foster youths’ earned Social Security… pic.twitter.com/gzoy92OLvx
— Secretary Kennedy (@SecKennedy) December 11, 2025
Federal Authorities Raise Alarms in 39 States
In mid-December, federal child welfare officials formally contacted governors in 39 states, urging them to end the practice of using foster children’s Social Security benefits to offset foster care costs. The letters emphasized that states serving as “representative payees” must manage benefits solely in the best interests of the child.
Federal guidance makes clear that foster care services are already funded through state and federal programs. Using a child’s Social Security payments to cover those same expenses effectively replaces public funding rather than supplementing it. According to federal officials, this approach undermines the intent of Social Security law and fails to protect vulnerable children.
How States Gain Control of Children’s Payments
In many states, child welfare agencies actively screen foster children to determine who may be eligible for Social Security or SSI. Once eligibility is confirmed, the state applies to manage the child’s benefits on the child’s behalf.
Rather than placing the money into protected savings accounts, trust funds, or other long-term arrangements for the child, agencies often apply the payments directly to foster care-related costs. These can include housing, supervision, and administrative expenses.
As a result, many young people leave foster care with no savings at all, even after receiving monthly federal benefits for years. Federal reviews have also found that some states rely on automated data systems or private contractors to expand these practices, increasing the number of children affected.
Financial Scale of the Practice
The scope of the issue is significant. Federal estimates suggest that roughly 27,000 foster children receive Social Security or SSI benefits, accounting for more than five percent of all children in foster care nationwide.
The financial impact on states is substantial. Available data shows that states redirected at least $179 million from foster children’s benefits in a single year. Over the long term, the total amount is believed to be significantly higher.
If federal enforcement expands and repayment is required, states could face obligations totaling hundreds of millions of dollars.
States That Have Already Ended the Practice
Not all states use foster children’s benefits this way. A growing number have changed course by prohibiting the diversion of Social Security and SSI payments. These states mandate saving funds for the child, typically through protected accounts or trust arrangements that continue into adulthood.
Idaho is frequently cited as a leading example. State officials concluded that using children’s benefits to offset foster care costs conflicted with the core goals of child welfare. Other states that adopted similar reforms have reported better financial outcomes for young people aging out of care.
These examples demonstrate that state policy choices, not unavoidable legal requirements, drive the practice.
Growing Attention From Congress
Lawmakers have increasingly focused on the issue during congressional hearings and oversight discussions. Members of Congress have questioned whether states should be allowed to identify eligible foster children systematically and redirect their benefits without preserving funds for their future.
The concern has centered on fairness and long-term harm. Many lawmakers argue that children who already face instability should not lose financial support that could help them transition successfully into adulthood. This attention has intensified calls for more explicit federal rules and stronger oversight of representative payees.
Why Repayment Could Become a Reality
A future administration could decide to enforce existing Social Security regulations more aggressively. Federal agencies already have the authority to monitor representative payees and address misuse of benefits.
If enforcement standards tighten, states found to have improperly used foster children’s benefits could be required to repay the funds. Depending on how far back reviews extend, repayment amounts could be substantial for many states. Federal officials have noted that such action would not create new spending but would return money to the children who legally earned it.
What Federal Agencies Say will Happen Next
For now, federal agencies say their primary goal is compliance rather than punishment. Federal agencies have encouraged states to revise their policies voluntarily before taking formal enforcement measures.
Federal priorities include ensuring that Social Security and SSI benefits remain the property of foster children, limiting state control over representative payee arrangements, and requiring safeguards that preserve funds for children’s future needs.
As pressure builds, the decisions states make in the coming months may determine whether this long-standing practice quietly ends or becomes one of the most significant child welfare repayment issues in recent history.