October 25, 2015

HIGHER EDUCATION BUBBLE UPDATE: Senior Citizens Getting Their Social Security Garnished for Student Loan Debt:

Compared to student loan debt, those 65 and older are much more likely to carry other types of debt. For example, about 29 percent carry home mortgage debt and 27 percent carry credit card debt. Still, student debt among older American households has grown in recent years. The percentage of households headed by those aged 65 to 74 having student debt grew from about 1 percent in 2004 to about 4 percent in 2010. While those 65 and older account for a small fraction of the total amount of outstanding federal student debt, the outstanding federal student debt for this age group grew from about $2.8 billion in 2005 to about $18.2 billion in 2013. . . .

Available data indicate that borrowers 65 and older hold defaulted federal student loans at a much higher rate, which can leave some retirees with income below the poverty threshold. Although federal student loans can remain unpaid for more than a year before the Department of Education takes aggressive action to recover the funds, once initiated, the actions can have serious consequences. For example, a portion of the borrower’s Social Security disability, retirement, or survivor benefits can be claimed to pay off the loan. From 2002 through 2013, the number of individuals whose Social Security benefits were offset to pay student loan debt increased about five-fold from about 31,000 to 155,000. Among those 65 and older, the number of individuals whose benefits were offset grew from about 6,000 to about 36,000 over the same period, roughly a 500 percent increase. In 1998, additional limits on the amount that monthly benefits can be offset were implemented, but since that time the value of the amount protected and retained by the borrower has fallen below the poverty threshold.

Remember, the colleges got their money up front.

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