The consequences of falling behind on loans or credit card payments are serious, but most retirees may not realize that their student loan debt could adversely affect their Social Security payments. Thousands of retired people are now experiencing decreased amounts, up to 15 percent, of their Social Security benefits due to defaulting on their student loans. The 15 percent reduction would be a reduction to the average Social Security benefit for a retired worker of $190 a month.
According to data collected by the Treasury Department, a growing number of retirees are seeing a decrease in their Social Security checks — as of August 6 the number was 115,000. This is nearly double where the reductions were at in August of 2011, and up from only six (yes, six) cases in 2000. Whether this is a symptom of more government action to find these cases or a rise in the number of these cases is unknown.
According to consumer advocates, many retirees aren’t in student debt for their own education, but for those of their children or grandchildren. Unlike other forms of debt, student loans cannot be negated by bankruptcy, though federal student loan debt makes up 85 percent of the $1 trillion in student debt (the rest made up of private lenders).
Frighteningly, younger generations are in even deeper debt, to which consumer advocates show much concern for their financial futures, and their Social Security.
For retirees in this predicament, making as high payments as possible on their student loans as quickly as possible will lead to regaining their regular Social Security benefits.
Source: San Francisco Gate, “Student loan delinquencies for retirees,” Aug. 17, 2012
- Our law offices represent cases of lost Social Security benefits. For more information, visit our Douglassvile Social Security disability page.