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Still owe student loans? Your Social Security payments may be used to pay them off

Friday, December 23, 2016   (0 Comments)
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NJ.com 12/23/16

 

Social Security recipients who owe student loans have found their payments garnished to pay off their debt and some have been forced into poverty as a result, according to a report released Thursday by the investigative arm of Congress.

The Government Accountability Office said 114,000 Americans receiving Social Security payments either because of their age or disability have had their payments cut because of outstanding debt, an increase of 540 percent over a decade. More than two-thirds of recipients in default, 69 percent, were on disability.

Most of the money collected, 70 percent, went to pay interests and fees, not to reduce the outstanding balance. Among those over 65, the number receiving Social Security benefits below the poverty grew to 67,300, up from 8,300 in 2004, the GAO said. 

"This report shows us that seniors clearly aren't immune to the student loan crisis--they're deeply impacted by this issue to the point that it's leaving many of them in a dire financial situation," said U.S. Sen. Claire McCaskill (D-Mo.), who requested the report. "We could have hundreds of thousands of American seniors living in poverty due to garnished Social Security benefits if this trend continues, and we shouldn't allow that to happen."

 

The debt held by those aged 65 and older increased to $22 billion from $2 billion a decade earlier. Of the 870,000 borrowers in that age bracket, 37 percent were in default, compared with 17 percent of the 17.4 million borrowers under age 50.

The GAO recommended that the government adjust its Social Security garnishments to reflect increases in the cost of living, and make it easier for those on disability to get rid of their debt.

"The hard-earned Social Security checks that are the sole source of income for millions of seniors should not be siphoned off to pay interest and fees on student loan debt," said U.S. Sen. Elizabeth Warren (D-Mass.), who released the report with McCaskill. "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."


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