Robbing Peter to Pay Paul: Social Security and student loans

Social Security is the most important anti-poverty program in the country.  It kept 22 million people out of poverty in 2012.   What does this have to do with student debt?  Two words:  Treasury Offset.  The federal government can seize portions of your Social Security (including Social Security Disability) check to pay back defaulted federal student loans. 

These seizures are rising sharply. In 2001, 6 recipients had their Social Security offset.  This past year?  156,000.  The total amount garnished came to around $150 million– money that seniors did not put back into the economy.    This problem will continue to grow.  Millions of seniors have student loan debts, and their default rates are higher than the average, standing at roughly 12.5%.

Social Security garnishments are what I call a collateral consequence of default, along with tax and wage garnishment and destroyed credit scores.  Because there is no statute of limitations, it doesn’t matter when you or the student you co-signed for took out the loan.

What do these garnishment look like for real people?  Offsets are limited to 15 percent of a borrower’s benefit, and the first $750 per month of benefits is shielded from student loan offset.  In July 2014, the average retirement benefit was $1255.  Someone with this benefit level would lose $75 to a student loan garnishment.  Twenty-two percent of married couples and about 47 percent of unmarried people rely on Social Security for 90 percent or more of their income.  Women, especially women of color, are more likely to rely almost exclusively on Social Security for income.  While $75 a month might not seem so much to high wage earner, it pushes seniors on fixed incomes that much further into poverty.

Which brings me to the real question:  Why are we prioritizing the collection of old federal student loans over keeping seniors out of poverty?