Social Security is supposed to act as a safety net, to help people out of a tough spot in their life. That’s the theory. In practice, Social Security benefits can be pilfered thanks to the fact that public lenders are only prevented from poaching two months’ worth of Social Security payments made to your bank accounts. The rest is fair game – though as a consolation it can’t exceed 15 percent of your benefits or bring them below $750. Student loan debt for retirees is rapidly developing as a source of these garnishments.
How Retirees Can Wind Up Paying Off Student Loans
The problem is that while you may forget your loan, the public lender will not. While it may be unable to arrange to have the loan payments be made out of your current paycheck, it will be able to garnish your Social Security paycheck even if you’re already retired. Garnishment simply means that every month, a portion of your Social Security check will be withheld and paid to the creditor to cover the outstanding balance of your loan.
The crux of the matter is that the federal government, as the entity responsible for Social Security and taxation, can use these two responsibilities to force you to repay your loans even if they enter default – something private lenders cannot do.
The Causes
While the Government Accountability Office claims that this only affects a small percentage of the retirees, the numbers speak for themselves: in 2013, the number of retirees whose pension was cut to cover their defaulted loans totaled 36 thousand. The worst part? In 2005, the total number of retirees in this situation was just 6 thousand nationwide. That represents a 600 percent increase over less than a decade.
In many cases, the retirees are not even aware that their Social Security check has been garnished until they take a closer look at it and find out that they are receiving less money than usual. What complicates matters further is that the payments can be made even if the retiree in question never completed their education or even signed up for the loan in person. This can happen if you sign up for “free” college courses or similar – most of the time, there is no such thing as a free lunch.
Dealing with the Issue
Managing this kind of repayment plan is difficult, particularly if you were unaware that you or an elder you care for has ever taken out a loan. The first thing to do is of course to research and find out everything about the loan.
There are few options to take. One is, of course, to work out a deal with the collection agency, which are usually responsible for setting up garnishments. However, it may result in a deal that’s actually worse for your monthly income. Rehabilitating or consolidating loans are also viable options, though one most appealing is certainly complete loan forgiveness through total and permanent disability discharge – discharging a loan on the basis of being permanently unable to work on a medical basis.
Most importantly, take steps to prevent this happening to you if you have not yet retired. Take stock of your loans, read your credit report, and find out if you have any outstanding loans. An ounce of prevention is worth a pound of cure.
If you are a retiree or getting close to retirement but aren’t current on your student loan payments, talk to an attorney at Van Horn Law Group to learn more about your options.