Tags: Government | Retirees | Poverty | Student Debt

Government Pushes Retirees Into Poverty for Decades-Old Student Debt

Government Pushes Retirees Into Poverty for Decades-Old Student Debt

(Getty/John Moore)

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Wednesday, 04 January 2017 10:10 PM Current | Bio | Archive

One of the most troublesome problems facing this country is rising student debt. It’s become virtually impossible for most Americans to pay for a college education without borrowing money—often amounting to tens of thousands of dollars.

What’s more, with the economy still recovering, many are finding this debt difficult to pay back. It can languish for years, growing massively over time as interest accrues.  However, the government will not be denied, often taking drastic measures to recover these unpaid federal loan dollars.

This means if you’re on Social Security the federal government can, and will, garnish your retirement check, and even your disability check, to get their money. This despite the fact that, according to the Wall Street Journal, the government’s own report shows the policy is pushing some of the most vulnerable members of society—the aged and disabled—below the poverty line.

The Problem of Senior Student Debt

Since 2001, the government has taken about $1.1 billion out of Americans’ Social Security checks to make up for unpaid student loans. In 2015 alone it collected $171 million from 114,000 people over fifty who are receiving disability benefits and 38,000 Americans over age 64 who receive retirement checks,.

Most of this debt was acquired decades ago, while the borrowers themselves were in college. However, a significant portion is a result of parents borrowing money on behalf of their children. The number of people taking out these federal Parent PLUS Loans has nearly quadrupled since 1989.

In the 2014-2015 school year, the average loan burden for parents was $14,658, whereas for undergraduates the figure was $3,565 for subsidized loans, and $3,944 for unsubsidized. Even when students take out both types of loans, the total is still only about half what their parents are assuming.

Such loans can take decades to pay off, particularly for Americans who were hard hit financially in the 2008 recession. Thus, now millions of seniors are entering retirement with thousands in student debt, unaware the government plans to seize a portion of their Social Security checks just when they’re most economically vulnerable.

Over Sixty and Under the Poverty Line

The average amount being taken out of Social Security checks monthly to pay off these debts is around $140. While that may sound manageable, in 2016 the government checks averaged just $1,341 a month per recipient, an over-ten-percent bite that forces many recipients to live below the poverty line.

Certain recipients of disability checks—those who are considered to be totally and permanently disabled—may be eligible to have their student debts completely erased. Unfortunately, many are unaware this is an option. Even those who do qualify face an expensive catch, since the Journal points out, “Any [student loan debt] erased is taxed as ordinary income.” Congratulations—you’re in such dire straits you’ve just had thousands in debt erased—now pay thousands to the IRS for that “income”!

Barring those special circumstances, having your student loans forgiven is extremely difficult. Even filing for bankruptcy doesn’t get rid of this type of debt. Payments must continue to be made, regardless of how difficult it becomes to make ends meet.

The problem only stands to get worse as time goes on. That’s because while student debt is increasing, Social Security is dwindling, with funds being paid out to retiring Baby Boomers exceeding what’s coming in from the current workforce. 

A 2016 report from the Social Security Administration confirmed that, unless drastic reforms are made quickly, the fund will be completely depleted by 2034, at which point recipients will get only 79% of their promised monthly benefit. Yet while payouts decrease, there’s no indication the government’s student debt collection from seniors will abate.

Retired Americans with unpaid loans will likely still have a significant portion removed from their already-shrinking Social Security checks. What’s worse, as the Journal points out, “Most Social Security recipients rely on their checks as their primary source of income.”

What You Can Do

If you already have outstanding student loans, make paying them down before retirement your top priority. By putting it off, or making only the minimum payments, you draw the situation out, accumulating more interest in the process and increasing the amount you owe.

Even more vitally, you must take steps to ensure you’re not dependent on a government check to begin with. Having a personal retirement account, particularly one that can hold non-cash liquid tangible assets, like a Gold IRA, gives you more options than most Americans.

It’s one of the ironies of American life that we can work hard for decades, do our best to ensure our children are able to succeed and find, as our reward, that our government is knowingly pushing us into poverty. The question is: Do we just accept that fate, or do we step up to defend our economic futures?

Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.

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TrevorGerszt
One of the most troublesome problems facing this country is rising student debt. It's become virtually impossible for most Americans to pay for a college education without borrowing money-often amounting to tens of thousands of dollars.
Government, Retirees, Poverty, Student Debt
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2017-10-04
Wednesday, 04 January 2017 10:10 PM
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