In 2005, older adults owed $2.8 Billion in federal student debt. In 2013, this increased to over $18 Billion, according to the Government Accountability Office (GAO) in 706,000 households compared to 22 million households with the remaining student load debt. People over 65 left on social security default their student loan debt at a much higher rate. Although other debts like income taxes can be discharged in bankruptcy, student loans are presumed to be non dischargeable unless undue hardship is proven. The elderly who live on Social Security benefits are having their benefits garnished however at an alarming increasing rate from about 31,000 in 2002 to 155,000 in 2013. This forces many of them into a poverty-level standard of living in retirement.
Although there are a few programs such as the IBR program that prevent this for some senior citizens. Although private student loans cant garnish social security benefits they can sue and collect from non exempt assets such as a home furniture cars, wages and bank accounts. Government loans can however garnish wages, tax refunds, bank accounts and social security benefits of senior citizens without going to court to obtain a judgment. Although private loans have to sue before they can attach assets the government loans can attach far more property without a court order or even actual notice. Instead notice is simply sent to the last known address of the individual.
What can be done is that the senior citizen can either
- File a Chapter 13 with a nominal monthly payment.
- File a bankruptcy and request for an undue hardship discharge.
- FIle for a rehabilitation and/or IBR loan. (Income based repayment) plan loans are based on earned household income. If the income is zero the payment is zero. Social Security is not earned income. So the payments for the elderly on social security and no earned income is zero. If the senior citizen has other income the IBR loan payment is based on that.
Still garnishing the social security benefits of senior citizens sounds horrible. The impact that it has on minorities seems worse than others. For most minorities Social Security is their only source of income in old age while others may have other pension incomes. When you look at this and the fact that sub prime auto loans have tripled it paints a picture of desperation for the economy not a recovery. Home mortgages for the poor and lower middle class has left the American dream. It now primarily belongs to an upper middle class and higher element of society and along with it the possibility of any upward class mobility. Whereas student loans for meaningful jobs was the goal it seems to have vanished with accountability for the schools that sold worthless degrees for non existing jobs. Social Security garnishments should not follow senior citizens to the grave or rush them into it. Social Security and becoming a senior citizens should be the end of student loans.