Student loan payments deducted from Social Security - YES!

iVillage Member
Registered: 12-31-2010
Student loan payments deducted from Social Security - YES!
8
Thu, 08-09-2012 - 3:35pm
For Unpaid College Loans, Feds Dock Social Security More retirees are falling behind on student debt, and Uncle Sam is coming after their benefits.
 
 
By ANNAMARIA ANDRIOTIS
 

It's no secret that falling behind on student loan payments can squash a borrower's hopes of building savings, buying a home or even finding work. Now, thousands of retirees are learning that defaulting on student-debt can threaten something that used to be untouchable: their Social Security benefits.

 

According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just 6 cases in 2000.

 
Grandma's New Financial Problem: College Debt 4:00

Tens of thousands of retirees have fallen behind on student loans--and the feds are coming after their Social Security benefits. SmartMoney's AnnaMaria Andriotis has details on Lunch Break.

The amount that the government withholds varies widely, though it runs up to 15%. Assuming the average monthly Social Security benefit for a retired worker of $1,234, that could mean a monthly haircut of almost $190. "This is going to catch an awful lot of people off guard and wreak havoc on their financial lives," says Sheryl Garrett, a financial planner in Eureka Springs, Ark.

Many of these retirees aren't even in hock for their own educations. Consumer advocates say that in the majority of the cases they've seen, the borrowers went into debt later in life to help defray education costs for their children or other dependents. Harold Grodberg, an elder law attorney in Bayonne, N.J., says he's worked with at least six clients in the past two years whose problems started with loans they signed up for to help pay for their grandchildren's tuition. Other attorneys say they're working with older borrowers who had signed up for the federal PLUS loan -- a loan for parents of undergraduates -- to cover tuition costs. Other retirees took out federal loans when they returned to college in midlife, and a few are carrying debt from their own undergraduate or graduate-school years. (No statistics track exactly how many of the defaulting loans fall into which category.)

#Marie
Community Leader
Registered: 08-25-2006
Wow. Not sure how I feel about this. Thanks for sharing.

Serenity
iVillage Member
Registered: 04-16-2008

While this doesn't affect me at all, I guess all I can say is:  do not co-sign your children or grandchildren's student loans.

@Marie, what does that "YES!" mean?  That you are outraged, or ecstatic, or ?

iVillage Member
Registered: 03-15-2012

 I was thinking the same thing.  Don't co-sign student loans (or any other loan).  After reading a few different stories from various sources and how people have been affected by co-signing loans I would have to think long and hard about ever co-signing a loan for my sons.

This is just one more reason.

 

Sandra

Community Leader
Registered: 08-25-2006
Suze Orman says never, never, never co-sign for anything for anybody.

It is one thing to take out a parent loan that is yours and yours only. Totally different to co-sign.

I knew a young gal that was upset that her fathers name showed up on the registration of her car that he co-signed the loan her. Hello! She probably didn't even need one, but it lowered her interest rate. Although I was thinking "spoiled brat" I reminded her how fortunate she was. Geesh! If she wanted true independence, then don't ask for a co-signer!

Serenity
iVillage Member
Registered: 04-08-2008
When I was 17, I had been working for 4 yrs already (26 hours/week plus school). I had 2 jobs for the summer and needed to buy a vehicle to get to job #2 on time. They told me I needed a co-signer so my stepfather cosigned. I was never late nor did I ever miss a payment. I paid it off the 4 yr loan in 2 yrs. The next time I went to get a loan, I was told I had NO credit! What? So if I had missed payments, I would certainly have bad credit - and my stepfather too. But if we pay under a co-signer, nobody gets the good credit! That is stupid!

Dee
Community Leader
Registered: 08-25-2006
P, really? Now that is interesting. Do you think that is still true today?

Serenity
iVillage Member
Registered: 04-16-2008

Not sure what the rules are in Canada.  In the US you have to be at least 18 to get a car loan.  That might have something to do with the requirement for a co-signer and other stuff as she was only 17 then.

iVillage Member
Registered: 04-08-2008
Yes, I believe that was the problem. I kind of felt cheated tho, bc I realized that I never really had a loan then. It was my stepfather's loan..but with my name on it...so I'm sure that it would have shown up somewhere as bad credit against me if I hadn't. Having worked for so long and been responsible, I felt like I should have been treated as an adult :smileyhappy:

Dee