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For Unpaid College Loans, Feds Dock Social Security

zbacku 2012/08/08 14:53:54
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By ANNAMARIA ANDRIOTIS

It's no secret that falling behind on student loan payments can squash a borrower's hopes of building savings, buying a home or even finding work. Now, thousands of retirees are learning that defaulting on student-debt can threaten something that used to be untouchable: their Social Security benefits.


According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just 6 cases in 2000.


Many of these retirees aren't even in hock for their own educations. Consumer advocates say that in the majority of the cases they've seen, the borrowers went into debt later in life to help defray education costs for their children or other dependents. Harold Grodberg, an elder law attorney in Bayonne, N.J., says he's worked with at least six clients in the past two years whose problems started with loans they signed up for to help pay for their grandchildren's tuition. Other attorneys say they're working with older borrowers who had signed up for the federal PLUS loan -- a loan for parents of undergraduates -- to cover tuition costs. Other retirees took out federal loans when they returned to college in midlife, and a few are carrying debt from their own undergraduate or graduate-school years. (No statistics track exactly how many of the defaulting loans fall into which category.)The amount that the government withholds varies widely, though it runs up to 15%. Assuming the average monthly Social Security benefit for a retired worker of $1,234, that could mean a monthly haircut of almost $190. "This is going to catch an awful lot of people off guard and wreak havoc on their financial lives," says Sheryl Garrett, a financial planner in Eureka Springs, Ark.

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Most consumer advocates and attorneys who work with seniors in this predicament told SmartMoney.com that their clients were unwilling to speak on the record, because of shame or fear. But they all stress that stakes involved can become very high for older people on a budget. Deanne Loonin, a staff attorney at the National Consumer Law Center in Boston, says she's been working with an 83-year-old veteran whose Social Security benefits have been reduced for the past five years. The client fell behind on a federal loan that he signed up for in the '90s to help with his son's tuition costs; Loonin says the government's cuts have left the client without enough cash to pay for medications for heart problems and other ailments.

Roughly 2.2 million student-loan debtors were 60 and older during the first quarter of 2012, and nearly 10% of their loans were 90 days or more past due, up from 6% during the first quarter of 2005, according to the Federal Reserve Bank of New York. "It's really a unique problem we haven't had to face before, and it's only going to grow," says Robert Applebaum, founder of Student Debt Crisis, a nonprofit advocacy group in Staten Island, N.Y

Read More: http://www.smartmoney.com/borrow/student-loans/gra...

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  • ProudProgressive 2012/08/08 15:21:49
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    ProudProgressive
    +4
    It's a difficult situation. On the one hand, if someone takes out a loan it's their responsibility to pay it back. On the other hand, if someone's only means of support is social security and that's cut, they could wind up homeless or dead.

    One thing that might be do-able is if someone in this situation took out the loan for a child or family member, then the child or family member rather than the retiree should be made responsible for paying it back.

    Good question, z. And thanks for not making it all about Obama or Romney :)

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  • Ron Burgundy "Gentlemanly L... 2012/09/20 12:24:43
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    Ron Burgundy "Gentlemanly Lover"
    what's the point of taking out these huge school loans when there's no guarantee you going to get a good job? i know of some people who have college educations and still have crappy jobs,there's no way they can pay that back.
  • Swampdog PWCM 2012/08/08 22:57:11
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    Swampdog PWCM
    Dock S.S.? Why not it's already broke.
  • mightymouse49 2012/08/08 19:33:16 (edited)
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    mightymouse49
    +1
    ...and we will be required to take the chip implant or give up our right to social security retirement and or disability. JMHO.
  • ProudProgressive 2012/08/08 15:21:49
    Care To Comment?
    ProudProgressive
    +4
    It's a difficult situation. On the one hand, if someone takes out a loan it's their responsibility to pay it back. On the other hand, if someone's only means of support is social security and that's cut, they could wind up homeless or dead.

    One thing that might be do-able is if someone in this situation took out the loan for a child or family member, then the child or family member rather than the retiree should be made responsible for paying it back.

    Good question, z. And thanks for not making it all about Obama or Romney :)
  • zbacku ProudPr... 2012/08/08 15:46:58
    zbacku
    +4
    This problem is created by both sides of the aisle. I always try to make it possible for others to voice their opposing views. Unlike some on SH. And we both know whom they are. Although, as you know, I do tilt a bit to the right. LOL
  • DizziNY 2012/08/08 15:06:51 (edited)
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    DizziNY
    +1
    If you pay taxes, that "loan" money is yours anyway. I also think it's insane that they want to try to deny you work if you fall behind? Wtf is that? Ok, so, you can't pay it back and they want to dent you work so you can live. where does the gov't come off telling pvt companies who to hire and who not to hire. Wow, the more I hear these progressive loons talk the more their hatred shows through.
  • ProudPr... DizziNY 2012/08/08 15:19:29
    ProudProgressive
    +2
    The article says nothing about denying anyone work, nor does it say anything about telling private companies who to hire. It also has nothing to do with progressivism, especially considering that it is the progressives who are trying to bring sanity to the student loan world and do something about the runaway costs of higher education.
  • zbacku ProudPr... 2012/08/08 15:51:42
    zbacku
    +2
    Oops, a bit off track on his part. I would say.
  • zbacku DizziNY 2012/08/08 15:50:12
    zbacku
    +2
    I think you have gone off kilter a bit about what this article is talking about.
    That 'loan' has nothing to do about paying our taxes.

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