The debate surrounding student loan debt in the United States has intensified recently. But now, Democrats have warned about the negative impact on Social Security benefits for seniors. Many older people are not getting all the money they should from Social Security because they haven’t paid back their student loans.
Lawmakers, mainly Democrats like Senator Elizabeth Warren from Massachusetts, addressed this issue in a letter. They claim it is affecting older Americans who depend on Social Security for their money. The letter was first shared with the USA TODAY.
Nearly 40% of borrowers who are 65 or older aren’t able to pay back their loans on time. Research shows that older adults who have student loan debt end up just as financially strained as those who didn’t go to college.
To make matters worse, government programs take money from their Social Security benefits. This means seniors lose up to $2,500 from their Social Security each year.
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For example, according to Federal Student Aid, through the Treasury Offset Program (TOP), the government can take tax refunds and benefits like Social Security from those who haven’t paid back their student loans.
Since the mid-1990s, a law has allowed the Treasury Department to work with the Education Department to recover money from defaulted federal student loans. They do this by taking a portion of the borrower’s Social Security or disability benefits.
This law permits withholding up to 15% of the monthly benefits, which averages to about $2,500 per year. The letter pointed out that this process, called “administrative offset,” unfairly affects older borrowers.
Recent data revealed a high rise in student loan debt among Americans aged 60 and older. Last year, over 3.5 million individuals in this age group had outstanding student loan debt, which was six times more than the number recorded in 2004. This debt made a total of over $125 billion increase since 2004.
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As a result, the number of Social Security beneficiaries experiencing reductions in their checks due to student loan defaults has also increased. According to a Government Accountability Office report, this figure increased from about 36,000 in 2002 to 173,000 in 2015.
Senator Warren and over 30 other lawmakers have called for a meeting with the heads of three government agencies: the Social Security Administration, Treasury Department, and Education Department by April 2. They want to discuss how the government collects money from seniors’ Social Security benefits.
In the letter sent to the government agencies, the lawmakers expressed their worries that older borrowers are unfairly targeted by the Treasury Offset Program (TOP) collection.
The lawmakers stated that under the program, up to 15% of monthly federal government benefits, like Social Security and disability payments, could be withheld. “Roughly 44 percent of borrowers who were 50 years and older at the time of their initial offset were subject to this maximum Social Security benefit withholding,” they stated.
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The letter was sent at 7 p.m. on Thursday. By Wednesday morning, both the Social Security Administration and the Department of Education confirmed receipt of the letter.
Their spokespersons mentioned that the agencies would respond directly to the lawmakers. However, after a request for comment, officials at the Treasury Department did not immediately respond.
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