More and more education loan borrowers are over the age of 65, and many struggle repaying those loans. In 2013, 155,000 Social Security recipients had those payments offset (reduced) to repay their defaulted federal student loans. Of those, 36,000 were over 65 years old—a 500% increase since 2002.
If you are retired or nearing retirement, you should know why your Social Security payments can be garnished, as well as what do to make this stop. That way, you can effectively manage your student loan payments while in retirement.
Default Consequences For Social Security Payments
Falling behind on your payments can hurt anyone, but default is especially harmful to seniors. Once a federal student loan defaults, the government can garnish or offset your earnings to repay what you owe. If you are still working, your employer would be required to deduct a portion of your paycheck. If you are receiving Social Security benefits, these payments would also be eligible to be decreased.
Fortunately, your whole Social Security monthly payment cannot be taken. The amount garnished from these payments is limited to allow you to maintain a minimum of $750/month. Unfortunately, $750 is approximately $230 below the poverty level guideline for a single person. Legislation aiming to adjust this amount has been introduced, but not yet passed.
Getting Out Of Offset
If you struggle to make ends meet while your Social Security payments are being offset, work to get those loans out of default—it will stop the garnishments altogether, and you won't have to worry about your Social Security payments not being what they should be.
You can get your loans out of default a few different ways:
- Pay them in full (don't worry, not many people can do this).
- Rehabilitate your loans.
- Consolidate your loans.
- Set up an affordable, reasonable payment plan with your loan holder.
For that last option, this plan would be based on your financial situation. It would require you to make voluntary payments, but these may be significantly less than the amount taken through Social Security offset.
As a last resort, you can also try writing a polite, concise letter to the loan holder asking for a reduction in the garnishment amount. Contact the current holder of your loan to talk about any of these options. If your loan is in default, the holder is either a federal student loan guarantor or the U.S. Department of Education.
Estimating Social Security Benefits
Of course, if you can, your best option is to avoid default in retirement. To help you do this, you'll want to have an idea of how much you may receive monthly or annually from Social Security and other accounts. This will allow you to better gauge your post-retirement budget, as well as how much you can put toward loan payments.
The Social Security Administration offers a way for future retirees to estimate how much they'll receive in Social Security benefits once they retire: the Retirement Estimator. If you have retirement accounts like an IRA or a 401(k), you may be able to estimate your income based on these accounts as well by contacting your account administrator or using another online calculator.