Government Garnishing Social Security Benefits Over Student Loan Debt

To recoup student-loan debt, the government is leaving people who rely on Social Security with benefits that fall below federal poverty guidelines, the Government Accountability Office said Tuesday.

The number of older Americans defaulting on education loans has steadily increased in recent decades, as many have returned to college or co-signed loans for family members. Unpaid debt has resulted in the government garnishing the benefits of 114,000 people age 50 and older in the past year, more than half of whom were receiving Social Security disability rather than retirement income, the GAO report said.

Garnishment exacerbates an already precarious financial situation for the 67,300 older borrowers who receive benefits below the poverty guideline, which is set at about $990 a month for a single adult. Even though no more than 15 percent of a recipient’s monthly Social Security payments can be taken in debt collection, that threshold has never been adjusted to reflect the increased cost of living.

“We can’t be garnishing people’s Social Security in a way that puts them into poverty,” said Sen. Claire McCaskill (Mo.), the ranking Democrat on the Senate Special Committee on Aging. “We need to make sure that we have adjusted the ability of the government to recover those loan amounts in a way that is not spiraling people into poverty.”

In April 2015, McCaskill and Sen. Elizabeth Warren (D-Mass.) asked the GAO for information about the money that seniors are left with after their payments are cut, the average duration of garnishment, the effect of student debt on retirement savings and the number of recipients who die without paying off their loans, among other things.

Researchers found that at the time of their initial Social Security garnishment, nearly half of borrowers age 50 and older had held their student loans for 20 years or more. A majority of these borrowers owed less than $10,000 when their benefits were first cut and many were hit with the maximum reduction, the GAO said. Seventy percent of the money collected through this form of garnishment from borrowers of all ages was applied to fees and interest, not the principle amount owed. Treasury charges a $15 monthly processing fee for wage and benefit garnishment.

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