Garnishments on Student Loans Hurting Retirees


Student loans can haunt seniors struggling to pay down debt before or in retirement. The loans are notoriously difficult to discharge leaving many seniors with loan defaults on the debt. It is difficult to qualify for a disability or bankruptcy charge, providing little or no relief for seniors. There is also no protection from garnishments of Social Security payments, resulting in millions of lost Social Security income each year for the most vulnerable citizens.

Millions of seniors rely on Social Security to keep them above poverty, yet in 2015, there were over 171 million in garnished checks, averaging $140 per month. The elder experiencing these deductions tend to owe less than $10,000 and hold down low paying jobs to make ends meet. Until Congress steps in and changes the laws, seniors with student loan defaults, will continue to lose needed income to garnishments.

Action to Take if You Are at Risk

There are options if you struggle to pay outstanding student loan debt. Qualifying for a permanent disability and in some cases a bankruptcy discharge can achieve loan forgiveness but the process is complicated and confusing.

Most recently, Congress added the ability to set up a repayment schedule based on income, which can bring immediate relief. The loan servicing provider can help bring loans out of default to stop wage garnishments and qualify you for the new repayment options.

Income based plans calculate a monthly payment based on discretionary income and extend repayment to either 20 or 25 years depending on the program you qualify. Calculations only include discretionary income, which considers household size and 150% of poverty level, for a maximum payment of 20% of discretionary income, sometimes eliminating a required payment. To remain on the income based plan you must reapply each year and submit tax returns as proof of income.