A group of student loan borrowers over the age of 50 are seeing adverse effects on their Social Security benefits because of their unpaid student loans.
The Government Accountability Office, or GAO, released a study in December outlining the effects of unpaid student loans on “older student loan borrowers”—specifically those above 50. The study found that approximately 114,000 older borrowers are losing part of their Social Security benefits, which are being garnished to pay student loans. According to the GAO, among the 65+ age group, that phenomenon has increased 540% in the last ten years.
Students who borrow from the federal government have a wide variety of options available to them when it comes time to repay; in fact, one part of the StudentAid.gov website is dedicated solely to outlining those plans and explaining to borrowers how to choose a repayment plan that best fits their needs. If the borrower either does not take advantage of those program options or simply cannot repay the debt, however, the federal government can engage a number of mechanisms to recoup that money—such as garnishing Social Security benefits.
While some might assume that these borrowers are co-signers on their children’s loans, forced to pay after the student defaulted, in reality the number of seniors over age 64 carrying student loan debt has increased significantly in the last decade—385% to be exact—according to the GAO study. Conversely, in the 25-49 age group, the demographic far more expected to have student loans, the number of borrowers increased by only 62%.
The effects of Social Security garnishment on the older population can be great. The minimum benefit of $750, decided on in 1996, was never adjusted for inflation or cost of living, which results in some older borrowers being garnished until their income falls below the poverty line. That number has also been increasing; the study shows that in 2004 no benefits were reduced to below the standard but by 2016, over 67,000 seniors had been pushed into poverty. In some cases, the borrowers are also suffering from diseases such as Alzheimer’s and are not aware their benefits are being debited.
Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, called the GAO report a demonstration of “just how draconian these [garnishments] are” as well as exposing issues with the policies themselves.
In many cases, the money collected doesn’t help the borrower’s overall balance. The GAO study found that more than 70% of the total amount garnished from Social Security benefits—about $1.1 billion—is applied only to fees and interest, not the principal balance. This means that the original loan amount remains, continuing to collect interest and fees. Five years after the initial default state and resulting garnishment of benefits, more than one-third of the borrowers were still in default, and for some the principal balance had actually increased.
While the options available to avoid default, such as an income-based repayment plan, are numerous, there are worries that borrowers are not aware that these options exist. Yu said that often, the first time older borrowers hear that they still have a student loan is during the Social Security application process, even though the report found that roughly 43% of borrowers looking at garnishment have had their loans for over 20 years.
The report itself was requested by two members of Congress, Sen. Elizabeth Warren (D-MA) and Sen. Claire McCaskill (D-MO). Warren released a prepared statement in which she condemned the situation as “counterproductive” and called for reform.