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Student Debt: Not Just for Kids

Dec 29th, 2015

In presidential campaign ads across the nation, student groups are calling for practical solutions to alleviate the burden of student debt. The face of the debt problem is generally portrayed by fresh faced 20-somethings. This is accurate imagery for the majority of those burdened with student debt, but with a rapidly increasing population of older, “non-traditional” students enrolling in college every day, the reality of those struggling with student debt goes well beyond millennials.

In fact, according to the Government Accountability Office, approximately 706,000 households headed by someone 65 or older carry student loan debt today and the amount of outstanding debt for this population has increased 600 percent since 2005, to a grand total of $18.2 billion.

Carrying education debt into the Golden Years can put a real dent into retirement savings, but for some it’s even worse when that debt eats into their retirement safety net. Over 155,000 Social Security recipients, including those receiving retirement, survivor and disability benefits, had their Social Security garnished in 2013 due to student loan debt.

That’s why a group of senators recently introduced the Protection of Social Security Benefits Restoration Act, which would eliminate the government’s ability to garnish Social Security benefits to collect federal non-tax debts, including student loans.

This legislation is long overdue and would bring needed relief to thousands of seniors struggling to pay student debt. Social Security is perhaps the best anti-poverty program in the nation— keeping millions of seniors afloat in their lean years, and currently providing a safety net for over 40 million Americans. To ensure the strength of the Social Security program as a safety net, no collections activities could be attached to Social Security in order to pay off debts until 1996 when the Debt Collection Improvement Act allowed for unpaid student loans to be collected directly from Social Security benefits. A maximum garnishment amount was set but these limits have not been updated in the last 16 years. As a result, when the federal government now garnishes the maximum allowed by law, they are placing the Social Security recipient below the federal poverty line.

The reasons for seniors’ failure to pay a student loan are wide ranging. Some of these loans were taken to help children or grandchildren attend college, but most of them, over 80 percent according to GAO, are debts that seniors accumulated to pay for their own education. Some seniors may have been confused by the process thus leading to missteps in repayment that added penalties and fees. Others may have enrolled in long repayment terms that allowed years of interest to accrue. For others, life may just have gotten in the way. Whatever the reason, the resulting reality for hundreds of thousands of seniors is a monthly struggle to pay for education, intended to improve their lives and economic wellbeing, long after that career benefit has subsided.

As the vice president of consumer advocacy and ombudsman at American Student Assistance, I’ve witnessed firsthand that seniors experiencing student loan payment trouble are among the most vulnerable of student debt consumers. They’re typically years removed from their college experience, so they’re unlikely to turn to their school for help or guidance. What’s more, most of the flexible repayment options that Congress put in place for federal student loans didn’t go into effect until years or decades after these borrowers took out their loans, so the majority doesn’t even know these repayment protections exist.

At ASA we took it upon ourselves years ago to annually identify and contact the senior citizens within our own federal student loan portfolio who were scheduled for offset of their Social Security benefits. We provide a clear, targeted letter that clearly states various options available, especially with respect to disability and financial hardship issues. We also provide a dedicated telephone line staffed by borrower advocates especially trained for this population. So far, this multi-year initiative has helped make seniors’ lives better: More than 100 of our borrowers in this situation have taken advantage of options to reduce or eliminate the offset, either by completing disability applications or agreeing to make voluntary income based payments.

But our experience has also shown that we’re just seeing the tip of the iceberg when it comes to seniors and student debt. Think about it: 30 years ago, only 4.21 percent of enrolled students borrowed for college and hundreds of thousands still struggle with the debt up to the current day. Nowadays, 71 percent of all students borrow an average of $30,000 — so what will the “seniors with student debt” picture look like when the Millennials hit retirement age? We can only surmise it will be much bleaker.

We welcome legislation like The Protection of Social Security Benefits Restoration Act and encourage members of Congress to support it with all due haste. But we also acknowledge that it’s just one policy solution among many, as we outline in our paper Retirement Delayed.

Increasingly, student debt is an issue not only for the young, but also for the young at heart—recent graduates of all ages, middle-aged adults with loans from their own education or that of a family member, and an increasing population of seniors struggling with student loans into their retirement years. If we are to truly face our nation’s student debt challenge head-on, we’ll need to enact solutions that acknowledge the wide age range of U.S. students today.