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Student loan debt and a not-so-safe safety net

When you think of the student loan debt crisis, the image of the struggling young college student trying to start their career often comes to mind. However, recent findings show that former students eligible for Social Security benefits are quite a bit older. In fact, many are eligible for Social Security benefits because of their age.

The Government Accountability Office (GAO) reported that approximately 114,000 Americans have a portion of their Social Security benefits seized to pay defaulted student loan debts.

The Smallest Reduction In Benefits Makes A Large Difference

For the elderly, Social Security represents just over one-third of income. It also accounts for 90 percent or more of the total income for 21 percent of elderly married couples and 43 percent of unmarried seniors. When you factor in the 15 percent taken out because of defaulted student loan debt, the reduction comes to 140 dollars per month.

A glimmer of hope exists for seniors are limited. Discharging unpaid student loans through bankruptcy is possible, but extremely rare. Other programs outside a Chapter 7 or Chapter 13 filings exist that can provide some relief:

  • A financial hardship program for exceptional circumstances through the Department of Education
  • Total and permanent disability (TPD) discharges/reductions for those receiving disability benefits based on a condition not expected to improve
  • Loan consolidation through an income-based modification program provided by the Department of Education, reducing payments, but increasing loan interest
  • Public service loan forgiveness
  • Closed school discharge

Offsets are having a devastating impact, particularly to the almost 70,000 Social Security recipients at or below the federal poverty guideline. Twenty-five percent of those recipients fell below the poverty line by the reduction in benefits. Those already below the poverty level are being pushed further into destitution.

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