The Education Department is demanding so much money from seniors with defaulted student loans that it’s forcing tens of thousands of them into poverty, according to a government audit.
At least 22,000 Americans aged 65 and older had a part of their Social Security benefits garnished last year to the point that their monthly benefits were below federal poverty thresholds, according to the Government Accountability Office.
Education Department-initiated collections on defaulted federal student loans left at least another 83,000 Americans aged 64 and younger with poverty-level Social Security payments, GAO data show. Federal auditors cautioned that the number of Americans forced to accept poverty-level benefits because of past defaults on federal student loans are surely higher.
More than half, or 54 percent, of federal student loans held by borrowers at least 75 years old are in default, according to the federal watchdog. About 27 percent of loans held by borrowers aged 65 to 74 are in default. Among borrowers aged 50 to 64, 19 percent of their loans are in default. The Education Department generally defines a default as being at least 360 days past due.
As unpaid student debt approaches $1.3 trillion, the federal watchdog’s findings underscore the consequences of increased student debt burdens and the risk they’ll wreak havoc on households in the coming years if U.S. workers continue to see little increase in their paychecks, the economy barely grows, and the Education Department’s contractors keep borrowers in the dark on repayment options.
“This GAO report strikes me as a kind of canary in a coal mine,” Sen. Richard Blumenthal (D-Conn.) said Wednesday during a hearing prompted by the report held by the Senate Special Committee on Aging. “What it says to me is, look at this narrow slice of the Baby Boom generation that now has debt [and] look at its impact … which is, if anything, more pernicious and insidious than it is for younger people.
“This age group is not only affected in more serious ways, but it is also going to grow,” Blumenthal continued. “In other words, this report says: Look out, the cliff is ahead, or the avalanche, [or] maybe it’s a tsunami, of older student debt.”
Struggling borrowers are rarely able to discharge federal student loans by declaring bankruptcy. As a result, federal auditors noted, their student debts follow them into retirement.
As the increase in average college tuitions outpaces federal borrowing limits for undergraduates, more parents are taking out federal student loans to pay for their children’s education. But GAO auditors said the vast majority of loan balances held by older Americans is for their own educations. Among borrowers aged 50 to 64, about 73 percent of their federal student loan debt was for their own schooling. For borrowers aged 65 and older, more than 82 percent of their debts was for their own education.
Some 40 million Americans have student debt, according to the Federal Reserve and the Education Department. The average recipient of federal student loans owed 28 percent more in 2013 than in 2007, after adjusting for inflation, according to Education Department data.
Meanwhile, the typical holder of a bachelor’s degree working full time experienced a 0.08 percent decrease in weekly earnings during that same period. Among workers with advanced degrees, median wages increased just 0.02 percent, according to figures from the U.S. Bureau of Labor Statistics.
Fred Klonsky 
This is sad. The majority of families don’t realize the full impact of singing up for the Parent PLUS Loan. Since grants and scholarships only cover a fraction of the cost of college today, parents will do anything to help their children get educated so they can get a good job. However, PLUS loans are too easy to obtain and just the same financially as buying a new Mercedes every year- for four years ($25k-$50kyr). Then the parents are left holding the bag when the student graduates with $100k+ in debt that can’t be discharged because the students don’t make enough to help pay any significant amount towards the loans to help their parents.
Also, the for-profit colleges also allow older adults to sign up for regular Stafford Loans for a large amount of money $20k + year as well in hopes their new education will yield a big return in a new career. Too many older students a for profit education is not yielding the return they hoped but now have a albatross around their neck that can’t be discharged. These two thing are are the major contributors to the 22,000 Americans aged 65 and older had a part of their Social Security benefits garnished. What do you think?