Seniors Losing Social Security Benefits Over Unpaid Student Loans

Student loan debt is hard to get rid of, even through bankruptcy. Unpaid student loans can follow you for decades and even affect you long into retirement. The typical student loan borrower is in their 20s or 30s and facing six-figure debt while starting a career, but new data shows that older Americans are also affected by the student loan crisis. According to a new report by the Government Accountability Office, more people than ever over the age of 65 have student loan debt, often with painful consequences.

Older Americans who defaulted on student loans may be living with decades of reduced benefits and wages. In 2015 alone, Social Security benefits were reduced for 173,000 people, up from just 36,000 people in 2002. This includes not only seniors but younger people receiving Social Security.

The report found that the number of seniors whose checks were garnished to below the poverty line due to student debt increased from 8,300 in 2002 to more than 67,000 in 2015. In the report, the GAO recommends amending the rules so Social Security checks are no longer reduced as severely for federal student loan debt. The threshold for Social Security garnishments was set in 1998 and has never been adjusted for inflation. The government cannot leave Social Security beneficiaries with less than $750 in benefits, but this floor has never been adjusted for cost of living. In 2016, the poverty level for a single adult was $990.

The report found that garnishing Social Security benefits isn’t even a successful strategy for collecting outstanding debt as more than one-third of seniors were still in default after two years of garnishments. Only a tiny portion of garnishments actually go toward the loan balance; most of the money collected goes toward interest and a $15 monthly fee for the garnishment. Over 70% of the $1.1 billion the government collects through Social Security garnishments to pay off student debt goes toward interest and fees.

“It’s no wonder many Americans don’t think Washington works for them: our government is shoving tens of thousands of seniors and people with disabilities into poverty through garnishment every year — and charging them $15 every month for the privilege — just so that the Department of Education can collect a little bit more interest and keep boosting the government’s student loan profits,” said Senator Elizabeth Warren, who requested the report along with Senator Claire McCaskill.

If you are struggling with student loan debt, a Los Angeles bankruptcy lawyer to explore your options, which may include loan modification, bankruptcy, or debt consolidation.