Social Security and Student Loans

       The rising cost of higher education continues to be a problem. As annual college tuition increases outpace the rate of inflation so does the amount of money borrowed by attendees. Much has been written about the mountain of debt faced by college graduates who once out in the work force struggle to make ends meet on salaries that often do not provide them enough to cover their living expenses and student loan repayment obligations. Others want to start a family or buy a home and are restricted by having to make monthly student loan payments that amount to what is already the equivalent of a mortgage.

       But what about disabled and retired student loan borrowers? There are tens of thousands of seniors and disabled student loan borrowers who have fallen behind on repaying their loans. Student loans are not easily dischargeable in bankruptcy as are other loans. The result is that more Social Security recipients are caught in the student loan collection process.

       Social Security benefits can be garnished to pay back outstanding student loans. This means that a portion of a Social Security recipient’s benefits can be deducted to pay back these loans. The Department of Education notifies the U.S. Treasury to withhold portions of tax refunds and Social Security retirement and disability benefits of defaulting student loan borrowers. According to a report by the Government Accounting Office (GAO) more than 100,000 recipients are subject to a reduction in benefits to pay back student loans. This number will only increase as the population ages and student loan debt continues to climb in the face of rising education costs.

       Many Social Security recipients rely on these benefits as their primary or even sole source of income. They can ill afford to have it reduced for any reason. The average monthly offset is slightly more than $140. Is there anything that can be done to avoid a garnishment? In many cases there is. Next week I’ll talk about that.