It is hard enough for seniors to get by on their retirement savings without also having to grapple with student debt. But as more people over 65 carry college loans, they are struggling to pay back the money and falling into default. And that has made them vulnerable to losing a portion of their Social Security benefits.
At least 36,000 people age 65 and older had their benefits cut to pay student loan debt in 2013, a 500 percent increase from the 6,000 seniors who faced the same loss in 2002, according to the General Accountability Office. While that represents a tiny portion of the 38 million retired people receiving Social Security benefits, the trend is alarming enough that the top Democrat on the Senate Special Committee on Aging has now called for further research into the situation.
On Thursday, Sen. Claire McCaskill (D-MO.) sent a letter to the GAO requesting a study on the impact of the government garnishing the benefits of older Americans with student debt. She is asking for information on the money seniors are left with after their payments are cut, the average duration of garnishment, the effect of student debt on retirement savings, the number of recipients who die without paying off their loan, among other things.
“Garnishing Social Security benefits defeats the entire point of the program—that’s why we don’t allow banks or credit card companies to do it,” McCaskill said in a statement. “Social Security is the sole means of retirement income for tens of millions of Americans, and allowing those benefits to be garnished for student loan debt cuts a dangerous hole in our safety net.”
It is difficult to pinpoint exactly why so many seniors are carrying student debt into retirement. A study published by the GAO in the fall cited a number of reasons, including mid- or late-career retraining, co-signing loans for family and holding debt with 10- to 25-year repayment terms.
Researchers found that the total outstanding student loans held by seniors grew from $2.8 billion in 2005 to $18.2 billion in 2013. About 80 percent of that debt was money that seniors used to pay for their own education, while the remainder came from loans they took out to help children or grandchildren.
For the federal government, seizing paychecks, tax refunds and Social Security benefits has long been a controversial way to collect on taxpayer-funded college loans. The government uses the same tactics to recoup child support and unpaid taxes. It is usually a last resort, but one that can really sting for seniors struggling to make ends meet.
Among elderly beneficiaries, 52 percent of married couples and about three-fourths of singles get more than half of their income from Social Security, according to the Social Security Administration. Nearly a quarter of married couples and almost half of single seniors rely on their benefits for 90 percent or more of their income. And those benefits are just $1,300 a month on average.
There are some restrictions on the amount of benefits the government can take to settle student debts. No more than 15 percent of a recipient’s monthly Social Security payments can be taken and the benefits cannot drop below $750 as a result, according to the Treasury Department.
Still, there has to be a better way. Sandy Baum, a senior fellow at the think tank Urban Institute, has argued that the government could make more of an effort to help seniors enroll in income-driven repayment plans that would peg their loan payments to a portion of their earnings.
“Students are responsible for repaying the funds they borrow to pay for post-secondary education. That said, later in life, unforeseen circumstances arise,” Baum said. “Public policy should recognize the need for insurance, allowing people the funds they need to support themselves in their final years.”
Americans of all ages are increasingly burdened by student debt, but researchers at the GAO said the loans can wreak havoc for people over 65 who are more likely to hold defaulted loans. McCaskill’s office said the findings of the GAO report in the fall raised questions for the senator about seniors with student debt. Now she wants to know whether the government’s debt collection tactic is doing more harm than good.