The student loan crisis isn't just a Millennial problem

Tens of thousands of older Americans remain saddled with decades-old debt, leading the government to garnish their retirement benefits and send them reduced checks that sometimes leave seniors with incomes below the poverty level.

First Look

It’s not just Millennials who are saddled with severe amounts of student loan debt – tens of thousands of Baby Boomers are also struggling to pay off decades-old debt, too, according to a government report.

While the conversation surrounding student loan debt generally concerns young professionals and those weighing the cost of rising tuition prices when filling out applications, a new report from the Government Accountability Office shows that many struggling under the burden of education-related debt are more than 50 years old, watching as their monthly retirement or disability benefits shrink to pay off debts they accrued decades ago.

As many older Americans have returned to school or co-signed loans for family members, more have defaulted on student loans. In response, the government has cut the Social Security retirement or disability benefits of some 114,000 people over the age of 50, often leading their monthly incomes to drop below the federal poverty line, according to the report, which was published Tuesday.

In 2015, the Department of Education collected $4.5 billion on defaulted student loan debt, some $171 million of which came from Social Security offsets. For some, that meant the government withheld 15 percent of their benefit; a devastating blow to those collecting monthly checks of less than $1,000, keeping around one-third of older borrowers in default for five years as their loan balances sometimes increased.

About 75 percent of the borrowers owed less than $10,000 when the government first began to offset their debt, and more than half of them were collecting disability rather than retirement benefits through Social Security, the report found. Seventy-one percent of the monthly funds collected went to pay fees and interest rather than principle, keeping borrowers in a vicious cycle of debt.

“We can’t be garnishing people’s Social Security in a way that puts them into poverty,” Sen. Claire McCaskill (D) of Missouri, the ranking Democrat on the Senate Special Committee on Aging, told The Washington Post. “We need to make sure that we have adjusted the ability of the government to recover those loan amounts in a way that is not spiraling people into poverty.”

Ms. McCaskill and Sen. Elizabeth Warren (D) of Massachusetts prompted the report last year by asking the GAO for numbers regarding rate of garnishment, its effect on retirement savings, and the number of people who die without settling their student loan debt.

While the report’s findings are concerning, it also unveiled solutions that have helped some older borrowers escape the cycle. About one-third were able to pay off or cancel their debt after qualifying for a relief provision known as total and permanent disability (TPD) discharge, the report found. With more than half of the borrowers in question receiving some type of disability payment, that provision could prove crucial for many.

The GAO recommended that Congress reconsider offset provisions to Social Security, adjusting them to reflect the increased cost of living, and that the Department of Education make its requirements regarding TPD more clear.

“The GAO report is clear: Social Security garnishment for student loans is predatory and counterproductive,” Ms. Warren wrote in a statement on her Facebook page. “Congress should pass the Benefits Restoration Act [which would bar the government from syphoning benefits checks to pay government debt] – a bill I’m cosponsoring – to put a stop to it.”