Young Americans Get Tag Teamed by Social Security and Sallie Mae

To the over 40 million Americans who are dealing with student loan debt: Sallie Mae will take your money… right up until your last breath.  The federal government has resorted to withholding (up to 15%) of some retirees Social Security checks to pay back past due loan balances.  For young Americans who, should Social Security last another few decades, will take in around 75% of benefits that retirees do today, this means that the tiny amounts that they would receive will be reduced even further.

Let’s take a look at this week’s article in the Huffington Post:  Haunted by Student Debt to the Grave:

It will not be news to 41 million Americans that this nation is in the middle of a student debt crisis. That’s the number of people burdened by student loan payments. But many people, including many student debt holders, may be surprised to learn that people can be pursued for student debt even into their elder years.

In fact, the government is withholding Social Security payments for some retirees, because their student loans have not been fully repaid.  This is a growing problem which Sens. Elizabeth Warren and Claire McCaskill have asked the government to study in greater depth.

“Garnishing Social Security benefits defeats the entire point of the program — that’s why we don’t allow banks or credit card companies to do it,” said Sen. McCaskill. “Social Security is the sole means of retirement income for tens of millions of Americans, and allowing those benefits to be garnished to collect student loan debt cuts a dangerous hole in our safety net.”

That is one problem with this practice. But, as we will see, there are others.

Many people will be surprised to learn that any seniors are still paying off their student debt. They are. 706,000 households headed by someone 65 or older are still paying off their student debts, according to a report by the GAO. Collectively these households owed $18.2 billion in 2013. That’s 6 and a half times as much as they owed in 2005, when these senior households’ total debt obligation was “only” $2.8 billion.

The article goes on to point out how Social Security checks were immune from garnishment until 1996, when Congress changed the rules and made an exception for student loan debt.  Although they make the case at the end for debt forgiveness, this article contains some very useful background knowledge.

In my newly released book “How Are You Not Angry Yet:   How Social Security is Destroying the Futures, Finances and Hopes of Generations X,Y and Z and How We Can Put an End to it”, I devote an entire sub-chapter to this topic.  Here is an excerpt from the book:

“If you’ve defaulted on your student loans, as some 650,000
borrowers did in 2012, most of us are well aware this will spark some
aggressive debt-collection methods. It’s not uncommon to see your
wages garnished, IRS refunds withheld and various fees tacked on to your
balance. What you don’t know, is that if you are not able to pay off
those student loans by the time you retire, the government will withhold
money from your Social Security checks to repay that debt.  That’s
right, if you’re in default, you won’t even get the full amount of that
minuscule check that you were supposed to receive from Social Security.”

(From Chapter 1.10: How FDR Will Rat You Out to Sallie Mae)

The amount that the 65 and older crowd owe today will be dwarfed by the amount that will be owed by the time Generation X’ers and Millennials reach retirement age.   Stagnant wages and negative long-term economic trends will see to that.  This will put a further strain on the future finances of young Americans.

-R.J. Renza, Jr.

Take a moment and sign the National Petition to Opt-Out of Social Security.  The more signatures we gather, the more pressure we place on Congress.

This week marks the release of my first e-book “How Are You Not Angry Yet:  How Social Security is Destroying the Futures, Finances and Hopes of Generations X,Y and Z and How We Can Put and End to it,” which takes on Social Security from the perspective of young America in a visceral and humorous way.  “Angry Yet” breaks down the complex topic of Social Security into a way that most Americans can easily understand and is available here.

 

facebooktwittergoogle_plusredditpinterestlinkedinmail
No Comments

Add a Comment

Your email address will not be published. Required fields are marked *