Whether you are happy about the election results or not, the one thing most Americans can agree upon is a change is needed in Washington. One major challenge for individuals receiving social security benefits is the garnishment of their social security checks by the federal government for unpaid student loans. The government calls it an “offset”. But, whether you call it an “offset” or a “garnishment” is academic because it all amounts to less money in the pockets of our disabled and/or elderly citizens. One of the major challenges Congress will face in 2017 will be whether or not to continue the “offset” program which is plunging thousands of disabled and/or elderly Americans into poverty.
The U.S. Government Accountability Office (GAO) released a study on December 20, 2016 in which they examined the amount of debt collected by the U.S. Department of Education (ED), as well as, the effects on disabled and/or older student loan borrowers as a result ED’s offset or garnishment of student loans from social security benefits. Because Social Security benefits are often the primary source of income for many older or disabled Americans, this GAO study was extremely important and long overdue.
The GAO study found that the typical student loan borrower experienced a monthly offset to their social security check in the amount of $140.00 per month. For many the offset reached as high as 15% of their social security benefits. In addition to the offset for the student loan payment, student loan borrowers also were hit with “offset fees” which amounted to an additional $180.00 lost each year by the student loan borrowers. Many of the student loan borrowers held their student loans for over 20 years prior to the offset by ED.
In 2015, approximately 114,000 student loan borrowers over the age of 50 had their Social Security disability, retirement, or survivor benefits offset to repay their defaulted student loans. These offsets caused many of the student loan borrower’s income to drop below the poverty level. While Social Security benefits are adjusted annually for the increase in the cost of living, the GAO found the offset amount has not been adjusted since 1998. This failure to keep up with the times has increased the number of older or disabled Americans living below the poverty level.
In 2004, approximately 8,300 student loan borrowers who received Social Security benefits had income less than the poverty level. In 2015, the offsets for student loan payments have caused approximately 67,300 student loan borrowers receiving Social Security benefits to fall below the poverty level. The GAO chart below shows the number of student loan borrowers age 50 and older whose social security benefits are below the poverty threshold after the offset for student loan debt for the years 2004 through 2015.
Recognizing the financial hardship posed by the Social Security offset provisions, ED proposed new guidelines which would have adjusted the offset provision to be indexed to inflation in 2015. To date, Congress has taken no action to pass such an important proposal.
Federal student loans are debts owed to the federal government. It is in the best interest that these debts be repaid. Repayment options do exist for the student loan borrower receiving social security benefits to repay the loans in an amount they can afford. Additionally, many borrowers qualify for forgiveness programs but fail to take advantage of these programs.
While it remains to be seen how the student loan crisis will be handled by the new Congress, there are options which can eliminate the offset for student loan borrowers receiving Social Security benefits. There are several student loan lawyers throughout the country which can assist borrowers in dealing with their loan servicers. Many Income Based Repayment plans are available with payments as low as zero dollars ($0.00) per month. Additionally, individuals receiving Social Security disability benefits can often qualify for the Total and Permanent Disability programs.
Change can happen but it will require writing your Congressman and expressing your concern about the offset program. But, until any change becomes law, the smart money is on student loan borrowers speaking with a qualified student loan attorney to determine their best course of action.