Economy

Lingering Student Loans May Be Forcing More Seniors Into Poverty

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More than 20 percent of the 155,000 Social Security recipients whose checks are docked to pay back student loan debt are seniors, according to a new report from the Government Accountability Office (GAO).

In 2013, about 36,000 seniors lost part of their Social Security allotment due to outstanding student debt. That is a six-fold jump from 2002, when just 6,000 people in that group had their checks garnished over education loans, the report says. The GAO finding confirms similar data reported by the Treasury Department in August.

From 2004 to 2010, the proportion of American households headed by a senior with outstanding student loan debt also jumped dramatically according to the GAO, from 1 percent to 4 percent in just 6 years. The agency estimates that 706,000 U.S. households are headed by someone over 65 who still owes on student loans.

Education debt is just one of the many forms of borrowing that American retirees are finding it harder and harder to escape. While fewer than one in three seniors had debts in 1998, a full 43 percent did as of 2010. The median amount of those debts jumped from $13,600 to $21,200 in that time, and the ratio of senior citizens’ debts to their assets doubled from 6.4 percent to 13 percent.

While most of that debt relates to mortgages and credit cards, education debt is unusually hard to get rid of. Debt collection companies have persuaded the courts to make student loan debt impossible to discharge in bankruptcy, a unique attribute among the various types of debt people carry. As a result, student loan debt stays with people throughout their lives and haunts their family members after they die.

There is a similar carve-out for student debts as relates to Social Security rules. Those checks aren’t supposed to be subject to wage garnishment rules that provide creditors a last-resort collections option for most types of debts. But in 1996, Congress changed its mind and made one exception to the ban on Social Security garnishment: student loan debt.

Social Security is the most effective anti-poverty program in the country, but garnishing checks to repay debts undermines its efficacy. Even for the hundreds of thousands of seniors who don’t have their retirement payments automatically docked, “debt reduces net worth and income and can erode retirement security,” GAO’s Charles Jeszeck writes in the report. Retirement security is already elusive for millions, and the nearly $7 trillion gap between what Americans have saved and what they will need in retirement represents a potential crisis.

The poverty rate among American seniors is at least one in 10 and probably closer to one in seven. And extreme poverty among senior women jumped by 18 percent last year, shocking experts.