Privacy   |    Financial   |    Current Events   |    Self Defense   |    Miscellaneous   |    Letters To Editor   |    About Off The Grid News   |    Off The Grid Videos   |    Weekly Radio Show

Student Loan Debt Eats Away At Social Security

Student loan debt is a big problem for students today – and chances are it’s going to be a problem for them for the rest of their lives. The issue isn’t just how much the average student owes right now (about $24,000 at the time they graduate). The bigger problem is that if they don’t get that money paid back promptly, the federal government can take it straight out of their social security check – or the social security check of any older co-signer on the loan.

The painful, little-known loan repayment clause

Most students who fall behind on their loans justify not paying for one reason or another. Yes, there are many who don’t have the money, and that’s a real issue. On the other hand, since student loans aren’t tied to a foreclosure or repossession penalty, it’s easier to ignore collection letters from student loan agencies when money gets tight.

Unfortunately, not paying student loans off while you’re young has far-reaching consequences. Most student loans are underwritten by the government, and the government has ways of getting its money back. The easiest method to collect on long-overdue student loans? Just take payments out of Social Security checks.

This is a big surprise to many students. They’re not thinking about their retirement or their Social Security while they’re in school, but taking on debt is a life-long commitment. Short-term thinking about getting a loan for school can – and will – come back to bite you.

This is an extra painful problem for families where parents and grandparents agreed to co-sign loans. Grandma may have thought she was being helpful when she signed the paperwork so Junior could go to college, but the federal government just sees that she has a monthly check they can dock, and they have no qualms about taking that money now.

How much Social Security can the government take?

The amount of money the government takes from a Social Security check to pay for overdue student loans depends on the amount owed and the amount of the check. In general, the maximum amount that will be deducted from any one check is 15 percent. If you take 15 percent out of the official average monthly Social Security check of $1,230 (as of June 2012), then you’re looking at $190 going right back to the government.

New book reveals how to keep this “gangster” economy from murdering your money…

That’s a pretty significant cut, especially if that Social Security check is all you have to live on in retirement. Even worse is that many people aren’t getting anywhere near the official average of $1,230 for their check, making a 15 percent cut hurt that much more.

How many people are really affected?

Before you start thinking this is a rare problem, check the numbers. In the first half of 2012, the Social Security Administration deducted student loan payments from 115,000 checks. Five years ago, they were deducting student loan payments from around 60,000 checks a month. As you can see, the deductions are happening, and the number of deductions is picking up fast.

All told, there are 2.2 million people 60 and older with student loan debt. It’s their own debt from going back to school and the debt they’re tied to through their children and grandchildren. In the first quarter of 2012, 10 percent of those people were at least ninety days behind on payments.

The government starts taking money from Social Security checks after two years of non-payment. It’s a pretty long window, but the penalties, fees, and capitalized interest that will be lumped in to the loan after two years of non-payment may make it a life-long burden to ever get rid of the loan.

It’s not a surprise that older Americans are behind on debt payments and having their Social Security taken back from them – 45 percent didn’t save enough for retirement in the first place. Unfortunately, student loan debt is the one kind of debt you generally can’t get rid of with bankruptcy. As a result, the number of individuals and families who are losing Social Security money to student loan debt just keeps growing in yet another blow to the economic health of the country.

©2012 Off the Grid News

© Copyright Off The Grid News
Do NOT follow this link or you will be banned from the site!