A concerning trend has emerged wherein many seniors are being denied their full Social Security benefits due to defaulting on student loan payments, prompting calls from lawmakers to cease this practice.
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Social Security
Led by Sen. Elizabeth Warren of Massachusetts, a group of Democratic lawmakers penned a letter on Tuesday, exclusively shared with USA TODAY, shedding light on the detrimental consequences of these offsets on older Americans who heavily rely on Social Security as their primary source of income.
Seniors aged 60 and above constitute one of the fastest-growing demographics burdened with outstanding student loan debt, with nearly 40% of federal borrowers over 65 defaulting in 2015. Research indicates that these borrowers often enter retirement with financial struggles comparable to those who didn’t pursue higher education. Further exacerbating the issue is the federal government’s method of recouping student loan debts by garnishing Social Security benefits of senior citizens.
The letter, co-signed by over 30 lawmakers, calls for a briefing with the heads of three key federal agencies involved in this process – the Social Security Administration, Treasury Department, and Education Department – by April 2.
Under a law enacted in the mid-1990s, the Treasury Department collaborates with the Education Department to reclaim funds from defaulted federal student loans by withholding borrowers’ Social Security or disability benefits, allowing for up to 15% of monthly benefits to be withheld. This disproportionately impacts older borrowers, as evidenced by the sharp increase in the number of seniors facing offsets on their Social Security checks.
Last year, over 3.5 million Americans aged 60 and older had outstanding student loan debt, a substantial rise from previous years. The amount of debt held by seniors exceeded $125 billion, while the number of Social Security beneficiaries experiencing offsets due to loan defaults surged from roughly 36,000 in 2002 to 173,000 in 2015.
The letter emphasizes that offsetting Social Security benefits can push beneficiaries into poverty and contradicts the program’s mission to ensure the welfare and economic security of vulnerable Americans. The lawmakers propose exempting Social Security retirement, survivor, and disability benefits from offsets related to student loans as a viable solution to address this issue.
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