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If you default on your student loans there's a good chance your social security income will be garnished

Posted by on Aug. 24, 2014 at 2:02 PM
  • 66 Replies

Retirees' Social Security checks garnished for student loans

http://money.cnn.com/2014/08/24/news/economy/social-security-student-debt/index.html?hpt=hp_t4

August 24, 2014: 1:18 PM ET

NEW YORK (CNNMoney)

Joshua Cohen works with troubled student loan borrowers.

What's surprised Cohen lately is the increasing number of gray-haired people walking in his doors with a problem: A portion of their meager Social Security benefits are being taken by the government to pay for old student loans they had mostly forgotten about.


It's a growing national trend. Last year, 156,000 Americans had their Social Security checks garnished because of student loans they had defaulted on. It's tripled in number from 47,500 in 2006, before the Great Recession. That's according to analysis done by the U.S. Treasury for CNNMoney.

More from Ozy: Mom, dad, grandma and grandpa all under one roof

Like Cohen, other groups have noticed the increase too. A leading nonprofit group that works with students on repaying loans, American Student Assistance, has worked this past year with over 1,000 Americans who have had their social security payments garnished to repay outstanding student loans. That's a sharp increase from 200 people in the previous year.

chart social security garnished

For retirees, any cuts to their Social Security benefits really hurts.

"Social Security means survival. It means food, shelter, medication," said Cohen, a Connecticut attorney, who works with people on debt collection harassment and student loan repayments.

What's worse is that even if the unpaid student loan was small, the amount they owe now is usually a lot larger because of compounding interest rates.

Older Americans are hit

Retired Americans can start collecting Social Security benefits at 62. However, the folks that Cohen has worked with are in their 70's and 80's.

It's a substantial amount

The amount taken from these checks isn't small. The average Social Security monthly check is $1200, the typical amount taken is $180.

Refinancing not possible for most

Very few student loans can be refinanced and many people have outstanding loans with interest rates locked at over 7%, even though rates have fallen in recent years to below 3%.

Repayment terms on student loans are extremely rigid. They are rarely forgiven even in bankruptcy and people can have their wages garnished if they default.

Elizabeth Warren

The issue caught the attention of Senator Elizabeth Warren, who introduced a bill earlier this year to allow millions of people like Anderson to refinance their student loans. However, the bill was blocked in June.

Disabled not spared

Social workers are also seeing an increase in the number of people with mental and health issues having their Social Security disability checks garnished.

"I had a Korean War veteran in his 80's who had taken out a student loan for his son and then began having health problems. The government took money from his Social Security disability checks - money that he needed to buy medications," said Deanne Loonin, a director at the National Consumer Law Center, which works to provide economic security to low income and disadvantaged people, including the elderly.

According to the government data, the total amount garnished from social security checks last year came to $150 million.

by on Aug. 24, 2014 at 2:02 PM
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Replies (1-10):
jcrew6
by Platinum Member on Aug. 24, 2014 at 2:40 PM

There is no such thing as a free ride. 

FlowerGirl777
by Bronze Member on Aug. 24, 2014 at 3:18 PM
3 moms liked this

what about income based repayment plans? if your income is low enough, your payment is zero. after 20 years, it is forgiven. 

.veni.vidi.vici
by on Aug. 24, 2014 at 3:23 PM


Quoting FlowerGirl777:

what about income based repayment plans? if your income is low enough, your payment is zero. after 20 years, it is forgiven. 

That's what I thought, too

codfish
by Silver Member on Aug. 24, 2014 at 4:29 PM
4 moms liked this
If I am not mistaken it only applies to loan after 08 or so. It doesn't apply to all of those people who have been paying forever and can't seem to get them paid off.

Perhaps instead of bailing out banks and car companies we should have bailed out those who have honestly been trying to pay off their student loans.

Oh wait, everyday citizens don't line politician's pockets like companies and unions do.


Quoting FlowerGirl777:

what about income based repayment plans? if your income is low enough, your payment is zero. after 20 years, it is forgiven. 

rescuerdownunde
by Member on Aug. 24, 2014 at 4:34 PM
This is really sad and the reason why paying back our students loans is our number 1 goal.
lhiannan
by Member on Aug. 24, 2014 at 4:42 PM
Once you're in default, I don't think you qualify.

Quoting FlowerGirl777:

what about income based repayment plans? if your income is low enough, your payment is zero. after 20 years, it is forgiven. 

lhiannan
by Member on Aug. 24, 2014 at 4:44 PM
Idk-I have some loans from before then that were covered. I think that once you default, you're screwed, though.

Quoting codfish: If I am not mistaken it only applies to loan after 08 or so. It doesn't apply to all of those people who have been paying forever and can't seem to get them paid off.

Perhaps instead of bailing out banks and car companies we should have bailed out those who have honestly been trying to pay off their student loans.

Oh wait, everyday citizens don't line politician's pockets like companies and unions do.


Quoting FlowerGirl777:

what about income based repayment plans? if your income is low enough, your payment is zero. after 20 years, it is forgiven. 

SuckIt69
by Member on Aug. 24, 2014 at 4:54 PM
We're always the ones getting screwed. :/
.veni.vidi.vici
by on Aug. 24, 2014 at 10:15 PM


Quoting rescuerdownunde: This is really sad and the reason why paying back our students loans is our number 1 goal.

I don't understand what you mean. Do you mean that you don't prioritize your student loans?

.veni.vidi.vici
by on Aug. 24, 2014 at 10:16 PM


Quoting SuckIt69: We're always the ones getting screwed. :/

what do you mean by "we"?

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