It’s one thing when young adults leave college carrying high debt burdens into their new careers. It’s something else entirely when those at the end of their work lives, or whose careers were cut short by disability, find themselves still owing on student loans that now are mercilessly shrinking the one resource they have left — their Social Security benefits.
Private lenders are not allowed to tap Social Security checks for repayment of student loans. But the federal government can and does. More than 156,000 Americans have their Social Security benefits garnished or “offset” by the feds for such debt. About 70 percent of those are on disability. The rest are age 65 or older and are collecting retirement benefits. The government can take up to 15 percent of those benefits, leaving recipients as little as $750 a month to live on. That limit was set in 1998, when $750 a month was a little over the federal poverty threshold.
The poverty threshold has risen above $1,000 a month since, but the offset limit has not changed. The result? Government offsets are pushing the disabled and retirees into poverty. An offset limit tied to the poverty threshold would exempt about 68 percent of all those who now have their benefits garnished, according to the Government Accountability Office.
While politicians wrestle with the very real conundrum of how to deal with what is now $3 trillion of student debt overall, they first should provide relief for those who depend on Social Security benefits.
It can be argued that young people should be prepared to repay loans that represent an investment in their careers. But what is the argument for someone stricken by illness or an accident that has ended their ability to earn a living? Or for those who reach retirement age still carrying student debt because they never were able to make ends meet?
For now, those borrowers find themselves in a type of debtor’s prison, with few ways out. Once offsets begin, the government can add a collection fee equal to 25 percent of the principal and interest already owed. Refinancing such loans is prohibited by law.
As Congress undertakes its first reauthorization of the higher education act since 2008, U.S. Rep. Keith Ellison, D-Minn., is among those proposing that the government simply stop the offsets and exempt Social Security benefits from student debt repayment.
“Students, as much as I oppose this massive debt, are at least on the upswing of their careers,” Ellison said. But by reaching into Social Security benefits to repay long-delinquent loans, he said, “we’re just creating poverty among borrowers 65 and older, leaving some with next to nothing. This is wildly unfair. We should not be abusing the most vulnerable people.”
Such an exemption for those in obvious hardship should be the long-term goal. Little is to be gained by chasing impoverished retirees and the disabled for a portion of their benefits. That is too high a price for the goal such individuals once held of a better life through more education. Congress also should lift the ban on refinancing, which may allow some borrowers to avoid offsets altogether.
At a minimum, the government should move swiftly to raise the offset limit to the federal poverty level and index it to inflation. That one act would have cost the Treasury about $94 million in 2013. But the relief it would bring to those living on fixed incomes is without measure.