Seniors deep in college debt default
More than 6 million Americans over age 50 still carry student loan debt, and about a third of them are in default, according to a new government study Tuesday that warned the government is even docking the Social Security checks of tens of thousands of senior citizens to make them pay off what they owe.
A majority of the oldsters contracted their debt midcareer, and some were paying off loans they took for their children. But others racked up their bills decades ago yet are still struggling to get it taken care of, the Government Accountability Office said.
Some 870,000 people over the age of 65 owe student loans totaling $22 billion in debt, and 37 percent are in default. Of those ages 50 to 64, 29 percent are in default.
For those receiving Social Security, either because they’ve retired or are collecting disability, the government can siphon money straight out of their checks. The average monthly payment was cut $140 for those in arrears — in addition to a $15 penalty fee each month, GAO auditors said.
The government can dock up to 15 percent of someone’s Social Security check, which the GAO said eats up an increasingly large share of fixed incomes.
“A growing number of older borrowers may experience financial hardship in the years leading up to or during retirement because the Social Security offset threshold has not been adjusted for increases in costs of living since program provisions were implemented by regulation in 1998,” the GAO said.
Some people whose Social Security checks are at the lower end may even qualify for a suspension of college debt repayments, but many of those aren’t aware of the assistance, the audit found.
Older folks are more likely to have larger debts. Just 10 percent of those ages 50 to 64 had $50,000 in student debt, while 15 percent of those 65 and older had that much.
The Education Department is trying to automatically suspend offset payments for people on disability. But the GAO said the department isn’t telling borrowers about the suspension, and many of them are racking up more interest that could eventually come due once they switch from disability to regular Social Security.
“Unless a better method is developed to allow them to verify their annual income during the 3-year monitoring period, the majority of loans may be reinstated after initially being approved,” the audit said.
The Education Department agreed with all five of the GAO’s recommendations for transparency and action.