Boston, Massachusetts – Democratic lawmakers are raising concerns over the impact of student loan debt on older Americans’ Social Security benefits. A recent letter from Sen. Elizabeth Warren of Massachusetts and Sen. Ron Wyden of Oregon to the Biden administration warned that millions of older adults could see a reduction in their Social Security benefits due to delinquent student loans.
The lawmakers highlighted that borrowers in collections could face an average annual reduction of $2,500 in their Social Security benefits, a significant blow to those relying on Social Security as their primary income source. The U.S. government possesses extensive collection powers on federal debts, allowing it to seize tax refunds, wages, and retirement benefits of borrowers in default.
Amid the pandemic, the U.S. Department of Education had temporarily paused its collection practices for 12 months. However, with the resumption of payments looming, concerns are growing about the potential consequences for borrowers facing missed payments.
Experts note that outstanding student debt among older Americans has been steadily increasing. In 2023, over 3.5 million Americans aged 60 and older were reported to have student debt, representing a significant rise from previous years. Consumer advocates criticize the government’s collection actions as extreme, especially considering the impact on retirees who heavily rely on their Social Security benefits for survival.
With Social Security benefits constituting nearly all income for a third of recipients over the age of 65, the potential reduction due to student loan debts could push many older adults closer to poverty. Some retirees have reported having to choose between essential needs like food and medication as a result of garnishments on their Social Security benefits.
The lawmakers have requested a briefing from the Biden administration on its plans to address the issue before the protection measures expire in late 2024. As discussions continue on the intersection of student loan debt and Social Security benefits, advocacy groups emphasize the urgent need for solutions to prevent older Americans from facing financial hardship in their retirement years.