Student Loan Debt Trims Social Security Payments for Retirees

By:  Brian Koenig
08/22/2012
       
Student Loan Debt Trims Social Security Payments for Retirees

 Much of the focus on the student-loan debt crisis has been placed on new graduates, but according to a new report, the federal government has been honing in on another demographic of debtors: retirees. The Debt Collection Improvement Act of 1996 granted the federal government authority to withhold a fraction of their Social Security payments if retirees owe defaulted debt to the government — including student loans.

Much of the focus on the student-loan debt crisis has been placed on new graduates, but according to a new report, the federal government has been honing in on another demographic of debtors: retirees. The Debt Collection Improvement Act of 1996 granted the federal government authority to withhold a fraction of their Social Security payments if retirees owe defaulted debt to the government — including student loans.

The Department of Education, which issues federal student loans, says it tries to work with debtors before garnishing their Social Security payments. Justin Hamilton, a spokesman for the federal agency, affirmed that accounts do not go to collections until about two years of non-payment. Then if there’s still no payment after months of attempted collection, the loan heads over to the Treasury Department, which administers the Social Security withholdings. “It’s when people aren’t making any attempt whatsoever that they start heading down that road,” said Hamilton.

From January through August, the government slashed a portion of more than 110,000 retirees’ Social Security checks, nearly double the amount in 2011, according to the Treasury Department. Since 2001, the gap has widened even further, as the number of retirees who’ve seen portions of their Social Security benefits withheld spiked from about 20,000 to now over 100,000. The amount of withholdings varies, but under the law a minimum of $750 a month must go untouched.

“It’s quite extraordinary because normally Social Security benefits can’t be touched by creditors,” asserted Deanne Loonin, an attorney at the National Consumer Law Center. “When you think about it, $750 a month is less than the poverty line. It’s not a lot of money for people to have.”

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Photo: small graduation cap and money educational cost via ShutterStock

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