In case you missed it, there has been a flurry of interest in issues that impact older student loan borrowers. Right before the holidays, the Government Accountability Office (“GAO”) released a report documenting the harsh consequences that the Department of the Treasury’s practice of garnishing Americans’ social security payments has on vulnerable student loan borrowers in default. Then earlier this month, the Consumer Financial Protection Bureau (“CFPB”) released a Snapshot report describing the increasing student loan debt that older consumers are carrying, as well as how the increased debt burden is impacting borrowers’ later life financial security. The takeaway from both of these reports is that student loans are threatening the financial security of an increasing number of older Americans.
According to the CFPB, the number of consumers age 60 and older with student loan debt has quadrupled over the last decade. Nearly 40 percent of federal student loan borrowers age 65 and older are in default. Older borrowers who carry student debt later into their lives often struggle to repay or have defaulted on their loans. Unfortunately, as complaints to the CFPB from older consumers show, trouble accessing income-driven repayment plans leads too many older borrowers to default, just as it does for younger borrowers.
Older borrowers with defaulted federal loans are often subject to having a portion of their Social Security benefits taken to repay their student loans. Although there are rules designed to protect a portion of the recipient’s benefits, the dollar amount protected has not changed since 1996, which leaves a borrower with only $750 a month ($9,000 per year) to live on.
The CFPB found that a large portion of older student loan borrowers struggle to afford basic needs. Older borrowers are more likely than those without outstanding student loans to report that they have skipped necessary health care needs such as prescription medicines, doctors’ visits, and dental care because they could not afford it.
The GAO report found that for more than two-thirds of borrowers whose monthly benefit was below the poverty line, the money deducted from their Social Security benefits was enough only to pay fees and interest, so the amount of the debt was not even reduced. This means that these borrowers could have their benefits offset indefinitely and might never finish paying off their loans.
For more than a decade, National Consumer Law Center advocates have highlighted the need for Congress to better protect Social Security recipients. At a minimum, NCLC advocates have called for Congress to index the $9,000 exemption to cost of living or inflation increases and to apply a ten-year limit to Social Security offsets.
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