August 17, 2012
The U.S. government is withholding money from Social Security recipients who stopped paying on federal student loans, reports NPR.
While some retirees might be dealing with their own student loan debt that they incurred decades ago, much of the debt is from federal PLUS loans, which older family members take out to help younger family members.
“In about 12 years, we’ve gone from just six cases [of Social Security benefits being cut] to 115,000 and counting — because this year isn’t even over yet. What we’re seeing is that student loan debt is following people later on into life,” said a senior writer at Smart Money.
“This is really the only consumer loan out there that people cannot get rid of. … In pretty much all of these cases, these are federal student loans that these retirees signed up for, by themselves. There is no co-signer involved.
“The amount varies, but it can run up to 15 percent of each month’s check. So when you look at the average monthly Social Security benefit — that’s about $1,200 — that means a monthly haircut of about $190. So, it’s not a small amount of money. And especially for a retiree on a fixed income, this sort of situation can really derail their retirement.”
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