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Federal government can garnish Social Security benefits for student loan default, even if just a cosigner

By Association of Mature American Citizens | Mar 13, 2020

Washington, D. C. — The world of America’s senior citizens can be a scary place. Aside from the physical hardships that come from aging, there are the unexpected financial hardships. For example, finding out that Social Security may not be the bullet-proof income you thought it would be.

Russell Gloor is a national Social Security adviser for the AMAC Foundation, established by the Association of Mature American Citizens in 2013 with a mission of supporting and educating America’s seniors.

According to Gloor, “Social Security benefits are off limits to nearly all creditors, but not the federal government. Uncle Sam can garnish Social Security benefits for certain debts you owe, including federal student loan debt. Benefits can be garnished for court-ordered child support or alimony, or for debts owed to the government. And, unfortunately, federal student loan debt is one of the things for which Uncle Sam can garnish Social Security benefits. That hurts seniors who depend on Social Security as a major source of their retirement income.”

Research conducted by the Consumer Financial Protection Bureau shows that seniors are the fastest-growing segment of the population with outstanding student loan debt. In fact, according to the CFPB, “In 2018, Americans over the age of 50 owed more than $260 billion in student debt, up from $36 billion in 2004, according to the Federal Reserve. Nearly 40% of borrowers aged 65 and older are in default.”

Gloor says that about 45% of unmarried Social Security recipients and 21% of married couples rely on their benefits for at least 90% of their income. “Thus, garnishing Social Security hurts American seniors when they can least afford it. Even though the government can garnish only 15% or your benefits and cannot leave you with less than $750 in monthly benefits, a 15% cut in benefits can be devastating.”

An analysis by Forbes Magazine shows that although they are not the largest segment of the population with student loan debt, it is estimated that the debt owed by Americans 60 years of age and older “has increased 71.5% over the last five years” and that the amount of debt they owe is more than $84 billion.

According to the Consumer Financial Protection Bureau, “most student loan borrowers are young adults between the ages of 18 and 39, (but) consumers age 60 and older are the fastest-growing age segment of the student loan market. This trend is not only the result of borrowers carrying student debt later into life, but also the growing number of parents and grandparents financing their children’s and grandchildren’s college education. Today, the majority of older student loan borrowers have loans that were used to finance their children’s education. They may have taken out these loans directly or cosigned on a loan with the student as the primary borrower.”

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