Report: Student Debt Crisis Drives Elderly to Poverty
College debt is weighing heavily on tens of thousands of elderly Americans, pushing them into poverty. That’s according to a new report by the Government Accountability Office, which revealed more than 110,000 people over the age of 65 had their Social Security checks garnished in 2015 in order to continue paying off student loans on which they had defaulted. The report further indicates more than 70,000 Americans over the age of 50 are currently living under the poverty line specifically because their Social Security payments are being slashed in order to cover the amount they still owe on student loans.
These figures contrast the widely-held notion that student loan debt is largely a problem for millennials. But what this report, which was generated at the request of Senators Claire McCaskill (D-Mo.) and Elizabeth Warren (D-Mass.), reveals this is an inter-generational problem. Further, it’s not one that is simply going to “sort itself out.” That’s because of those tens of thousands of borrowers whose Social Security checks are being cut to pay down this debt, they aren’t actually paying it down. Nearly 70 percent of those borrowers are only paying on the fees and interest. That means the overall amount of their debt isn’t decreasing, which means unless they start generating more money with another income source, they aren’t ever going to stop making payments. And guess who profits from all this? The federal government. For every Social Security check that gets scraped, $15 of it goes to the U.S. Treasury Department.
What this boils down to is that the federal government is forcing seniors and people with serious disabilities even deeper into poverty with a garnishment program they have no hope of ever escaping. Warren described the practice as both counterproductive and predatory. What’s more, as our Miami debt defense attorneys know well, the problem is getting worse. Between 2005 and 2015, the total amount of student loan debt held by borrowers over the age of 65 in the U.S. has increased by 400 percent.
This is not the way either of these systems are supposed to work. Social Security is designed as a basic social insurance program into which people pay throughout their working years. The trade-off is that when they reach a certain age, they begin receiving a check that helps keep them above the poverty line. Currently, about 22 million Americans rely on it. When the program was established back in the 1930s, there was no stipulation about garnishment for people who had debt. The deal was, you pay into the program, you get a check. Lending, meanwhile, involves banks getting to reap the profits of interest by also taking on the risk that some borrowers may not pay them back. Default is part of the deal. But the government is allowing lenders to scrape Social Security checks of individuals who are already living in poverty, which in turns encourages high interest rates that couldn’t be sustained on the free market.
This practice of allowing lenders to take a portion of that check first started in 1996 under the Clinton administration, under a bi-partisan deal. Now, Senate Democrats have proposed a measure that would repeal the law from 1996. However, with Republicans controlling Washington after next month, passage of this measure doesn’t seem promising.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call 305-358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.