For Unpaid College Loans,Feds Dock Social Security

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**Frazzled**

Evil bankers can only sue you. Not so with Uncle Sam
http://www.smartmoney.com/borrow/student-loans/grandmas-new-financial-problem-college-debt-1344292084111/

For Unpaid College Loans,Feds Dock Social Security
More retirees are falling behind on student debt, and Uncle Sam is coming after their benefits.. Email Print LinkedInFarkdel.icio.usRedditX ARTICLE
It's no secret that falling behind on student loan payments can squash a borrower's hopes of building savings, buying a home or even finding work. Now, thousands of retirees are learning that defaulting on student-debt can threaten something that used to be untouchable: their Social Security benefits.

According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just 6 cases in 2000.
The amount that the government withholds varies widely, though it runs up to 15%. Assuming the average monthly Social Security benefit for a retired worker of $1,234, that could mean a monthly haircut of almost $190. "This is going to catch an awful lot of people off guard and wreak havoc on their financial lives," says Sheryl Garrett, a financial planner in Eureka Springs, Ark.

Many of these retirees aren't even in hock for their own educations. Consumer advocates say that in the majority of the cases they've seen, the borrowers went into debt later in life to help defray education costs for their children or other dependents. Harold Grodberg, an elder law attorney in Bayonne, N.J., says he's worked with at least six clients in the past two years whose problems started with loans they signed up for to help pay for their grandchildren's tuition. Other attorneys say they're working with older borrowers who had signed up for the federal PLUS loan -- a loan for parents of undergraduates -- to cover tuition costs. Other retirees took out federal loans when they returned to college in midlife, and a few are carrying debt from their own undergraduate or graduate-school years. (No statistics track exactly how many of the defaulting loans fall into which category.)

.
.Most consumer advocates and attorneys who work with seniors in this predicament told SmartMoney.com that their clients were unwilling to speak on the record, because of shame or fear. But they all stress that stakes involved can become very high for older people on a budget. Deanne Loonin, a staff attorney at the National Consumer Law Center in Boston, says she's been working with an 83-year-old veteran whose Social Security benefits have been reduced for the past five years. The client fell behind on a federal loan that he signed up for in the '90s to help with his son's tuition costs; Loonin says the government's cuts have left the client without enough cash to pay for medications for heart problems and other ailments.

Roughly 2.2 million student-loan debtors were 60 and older during the first quarter of 2012, and nearly 10% of their loans were 90 days or more past due, up from 6% during the first quarter of 2005, according to the Federal Reserve Bank of New York. "It's really a unique problem we haven't had to face before, and it's only going to grow," says Robert Applebaum, founder of Student Debt Crisis, a nonprofit advocacy group in Staten Island, N.Y.

**Melissia**

Give them enough time and I'm sure they can do the same thing by writing it in the contract.

**Frazzled**

Melissia wrote:Give them enough time and I'm sure they can do the same thing by writing it in the contract.

No. Only your friendly neighborhood government can do that. Now that the govenment handles all student loans better pay up grandma!

**Melissia**

Contracts can do anything.

They can even turn a purchase of a physical product in to a license!

**Frazzled**

Melissia wrote:Contracts can do anything.

NO. They cannot.

Government however, can do many interesting things.

**Melissia**

Keep tellin' yerself that Fraz, and be sure to not read the fine print

**hotsauceman1**

Thats why im going to work my buttocks off for scholorships and grants. I already have my first semester of university paid off.

**Jihadin**

Do you know. The decease social security accounts are not closed out........

**labmouse42**

Student loans can be great ways to get ahead, as they increase your earnings potentional. If your going to take them, do so wisely.

Don't just load up on student loans because you can. If your taking loans, get a night job to help pay for your rent/food/tuition/books. Loans are just a little extra push to help you meet the required costs of education. Don't take $60,000 in loans if you can work part time for four years and take $20,000 in loans.

Now comes the warning....For gods sake don't default!
My wife defaulted before I met her, and her debt went from $30,000 to $60,000.
You can't get out of it. You can't file bankruptcy. If your married and file taxes jointly they can go after your spouse.
So don't default. Even if you have to call them and pay them change found in your sofa for a month, its better than defaulting.

**Ouze**

Frazzled wrote:Now that the govenment handles all student loans better pay up grandma!

Yes, another favorite conservative lie: that the government "took over" student loans. Another top 10 hit from the ignorant, unthinking noise machine.

Here's how it actually works, from someone who's worked in a college business office while attending college myself: Previously, you'd fill out a FAFSA for an guaranteed student loan (FFEL). The way it worked is a private bank - lets say, Citibank - would issue you a loan to you. If you paid, terrific. Citibank keeps the interest (which is paid by the US govt while you're in school, even) and it's all good. If you default when you get out, then Citibank transfers the loan to the US Treasury and they get made whole, 100% (plus whatever interest they already got). There's no risk to them at all: either you pay, or the feds pay. Once the feds own it and start collecting, then yes, they will take it from anything they can: tax returns, wage garnishments, and to a point, SSA or SSI payouts, exactly the same as any other debt to the feds, such as a tax liability. Nothing has changed here, and it's been like this since they removed the ability to discharge student loans via bankruptcy in the 80s.

Now, back to the main point - the take-away here is that the corporations had absolutely no risk - they get paid no matter what, it's all profits. The whole point of interest on a loan is to underwrite the "risk" they take in lending you money, but there is no risk in this program. It was absolute, pure corporate welfare - the kind of "waste, fraud, and abuse" conservatives claim to hate. The treasury cut out private companies from the GSL and offered them directly, after it was determined that the program could be run out of the Treasury for a significant cost savings both to the taxpayer and the student via lower interest rates. Which they did, which of course is evil since a Democratic administration did it. The only thing they hate these days more then a government program is a successful one.

Of course, if you want to get a private loan that doesn't involve the feds, you are welcome to do so despite the lying liars who pretend you cannot. The tradeoff, of course, is that since these loans are not guaranteed by the US government they must be guaranteed by you: expect to need either excellent credit or a co-signer and somewhat higher interest rates. The choice is yours.

The best option, of course, is applying for grants which do not requiring paying back. There are an enormous amount of scholarship programs available, and you should spend at least 2 months before going to school working on getting these 40 hours a week like a full time job.

**Frazzled**

Have you considered getting another loan, paying the student loan off and then filing? Max those credit cards with cash advances, pay off the government because only the government can put you in jail, and then file.

**purplefood**

Wow...
Student Loans in the UK are way better than the US...
Also apparently it is so much cheaper...

**hotsauceman1**

Am i the only one who wishes that Higher Education was Free? I mean surely it would be better for our country to have an educated populace with little to no barrier to entry?

**kronk**

Student loan interest rates are pretty damn cheap, comparatively speaking. College/University isn't.

Although, I understand the UK college tuition has gone up substantially over the past few years.

**Frazzled**

Melissia wrote:Keep tellin' yerself that Fraz, and be sure to not read the fine print

Dude I write the

ing things. Ok I don't write them. I negotiate them and tell the bloodsucking lawyers to write them. Then I review what they boilerplated in.

Automatically Appended Next Post:

Ouze wrote:
Frazzled wrote:Now that the govenment handles all student loans better pay up grandma!

Yes, another favorite conservative lie: that the government "took over" student loans. Another top 10 hit from the ignorant, unthinking noise machine.

Here's how it actually works, from someone who's worked in a college business office while attending college myself: Previously, you'd fill out a FAFSA for an guaranteed student loan (FFEL). The way it worked is a private bank - lets say, Citibank - would issue you a loan to you. If you paid, terrific. Citibank keeps the interest (which is paid by the US govt while you're in school, even) and it's all good. If you default when you get out, then Citibank transfers the loan to the US Treasury and they get made whole, 100% (plus whatever interest they already got). There's no risk to them at all: either you pay, or the feds pay. Once the feds own it and start collecting, then yes, they will take it from anything they can: tax returns, wage garnishments, and to a point, SSA or SSI payouts, exactly the same as any other debt to the feds, such as a tax liability. Nothing has changed here, and it's been like this since they removed the ability to discharge student loans via bankruptcy in the 80s.

Now, back to the main point - the take-away here is that the corporations had absolutely no risk - they get paid no matter what, it's all profits. The whole point of interest on a loan is to underwrite the "risk" they take in lending you money, but there is no risk in this program. It was absolute, pure corporate welfare - the kind of "waste, fraud, and abuse" conservatives claim to hate. The treasury cut out private companies from the GSL and offered them directly, after it was determined that the program could be run out of the Treasury for a significant cost savings both to the taxpayer and the student via lower interest rates. Which they did, which of course is evil since a Democratic administration did it. The only thing they hate these days more then a government program is a successful one.

Of course, if you want to get a private loan that doesn't involve the feds, you are welcome to do so despite the lying liars who pretend you cannot. The tradeoff, of course, is that since these loans are not guaranteed by the US government they must be guaranteed by you: expect to need either excellent credit or a co-signer and somewhat higher interest rates. The choice is yours.

The best option, of course, is applying for grants which do not requiring paying back. There are an enormous amount of scholarship programs available, and you should spend at least 2 months before going to school working on getting these 40 hours a week like a full time job.

How is it a lie. They were guaranteed student loans to get a favorable interest rate. Now they are direct loans from the government.

**kronk**

hotsauceman1 wrote:Am i the only one who wishes that Higher Education was Free? I mean surely it would be better for our country to have an educated populace with little to no barrier to entry?

Who will pay for it? Me? No thanks.

Some people have no business at university. I met two Freshmen when I was at University that were functionally illiterate and had no business being there. I know one dropped out after his first quarter. That's wasted tax payer money, wasted professors' time trying to grade their gak, wasted University resources, extra bodies in already crowded classrooms, and so on. Now multiply that by 100 or more if there is no barrier to entry.

There are other programs (Vocational schools, plumbers apprenticeships, associates degree programs, and so on) for those that can't make due at university.

I do agree that there should be more money available for those that deserve it, but let's not get crazy.

**Ouze**

Frazzled wrote:How is it a lie. They were guaranteed student loans to get a favorable interest rate. Now they are direct loans from the government.

These are 2 different ideas, which are not related to the first concept you posted earlier - in your words,

Frazzled wrote:Now that the govenment handles all student loans better pay up grandma!

So lets tackle all 3.

1.) I've already shown several links to where you can get a private student loan, which existed before and exist now. Go google "private student loan". Therefore, your post was a lie. I'd call it a mistake but since you work in the financial industry you could not possibly be ignorant of the real facts here.

2.) "They were guaranteed student loans to get a favorable interest rate". You still can. The rates range from 4.5% to 7%, depending on sub or unsub, and rates are capped by statute. The government does not charge interest while you are enrolled if it's a subsidized loan. No changes here.

3.) "Now they are direct loans from the government." This is the closest part of what you said to being true, but there really is no effective difference here - if you defaulted on a GSL before, the government would collect before, same as now. This is completely unchanged. The only change doesn't involve the student - it's that while you are in repayment the interest is no longer going to the lender as corporate welfare, it's used to pay for the program and keeps rates low. Now, as with then, you could always get a private loan from a bank or whomever and not have the government enforce it. This is, again, unchanged.

**LordofHats**

hotsauceman1 wrote:Am i the only one who wishes that Higher Education was Free? I mean surely it would be better for our country to have an educated populace with little to no barrier to entry?

The problem is that right now we're facing a situation where the value of a college education is rapidly decreasing. They're so common now, and easy to get even by people not qualified to hold ANY job, that some industries are starting to raise entrance requirements to master's degrees. The history field for example, has pretty much evolved into "get a masters or a doctorate or be a poorly paid intern for eternity."

Make them free and college degrees become the new GED. I.E. Nearly worthless unless the field is highly specialized (of which there are few openings). If anything, we want to decrease the accessibility to a college education from where it currently is, but that's not really gonna fix much either.

**Frazzled**

Ouze wrote:

1.) I've already shown several links to where you can get a private student loan, which existed before and exist now. Go google "private student loan". Therefore, your post was a lie. I'd call it a mistake but since you work in the financial industry you could not possibly be ignorant of the real facts here.

I never said you couldn't get a private student loan (good luck trying though). I said the government loan program is now directly from the government.

2.) "They were guaranteed student loans to get a favorable interest rate". You still can. The rates range from 4.5% to 7%, depending on sub or unsub, and rates are capped by statute. The government does not charge interest while you are enrolled if it's a subsidized loan. No changes here.

I never said differently. I never mentioned interest rates all. Translation quit calling me a liar or I might sue you.

3.) "Now they are direct loans from the government." This is the closest part of what you said to being true, but there really is no effective difference here - if you defaulted on a GSL before, the government would collect before, same as now. This is completely unchanged. The only change doesn't involve the student - it's that while you are in repayment the interest is no longer going to the lender as corporate welfare, it's used to pay for the program and keeps rates low. Now, as with then, you could always get a private loan from a bank or whomever and not have the government enforce it. This is, again, unchanged.

No the change is that the loan is directly from the govenrment. that gives them greater enforcement rights than before. Things like putting a lien on your social security.

**Vulcan**

Personally, I think if your college degree doesn't pan out - and a lot of them aren't right now - the COLLEGE should make the loan payments until it does.

After all, colleges are allowed to push pretty useless degrees like fine arts with absolute impunity. Then 60K+ in debt, the graduate gets to the real world and discovers that no one wants people with a BA in fine arts...

Even better, several banks around here are hiring MBAs to be bank tellers. That's right, 6 years of college to do something that doesn't even require high school level math. The pay is pretty crummy too, $8 an hour. How do the banks get away with it? Because there are soooooooooooo many MBAs out there that real MBA-level positions are oversaturated with applicants and they can pick and choose the best person... or more likely who'll accept the lowest comensation package.

So there you are, a hundred grand or more in debt... earning about what the average FAST FOOD worker makes (although I'll grant that the benefits will be somewhat better). But the college blithely assured you that your MBA would make you 'in demand and worthy of a good salary.'

**hotsauceman1**

Wow, maybe i should give you on college and find something that could actually give me money.

**purplefood**

kronk wrote:Student loan interest rates are pretty damn cheap, comparatively speaking. College/University isn't.

Although, I understand the UK college tuition has gone up substantially over the past few years.

It was free when my parents went to Uni.
It cost around £1,000 a year when my sister went to Uni.
It cost around £3,000 a year last year.
It now costs £9,000 a year tops.
And the loans for it basically mean it's easy to pay off...

**Frazzled**

Whats the German system?

**Frazzled**

A guaranteed loan does not mean the same ability to enforce the loan as if it came directly from the government.

And yes I can read mor gooder cos iwas educated in the bestest public skoolin

**Piston Honda**

Didn't need loans. Paid all my tuition with cash. Worked multiple odd jobs 30-50 hours a week. Cutting grass, shoveling snow, fixing toilets, lawnmowers, waiter, janitor, whatever. It sucks. Got a job at a nursing home once. Walked out after 3 hours.

Did everything but sell drugs and prostitution.

In hindsight, I probably would have been better off doing that.

2 for 1!

2 for 1!

**dogma**

Ouze wrote:The tradeoff, of course, is that since these loans are not guaranteed by the US government they must be guaranteed by you: expect to need either excellent credit or a co-signer and somewhat higher interest rates. The choice is yours.

Indeed. Bonus points if your cosigner is on his deathbed. At which point "Garnish what?" is a fabulous option.

Frazzled wrote:
I never said you couldn't get a private student loan (good luck trying though).

Really? I started undergrad in 2004, and of the 120k in student loans I owed ~70k were private and only ~15k were cosigned (by someone who is now dead). I'm an exception in that I paid all my loans off within 4 years, but for most people those loans are lifelong yokes; which benefits the lender.

**DIDM**

Maybe the fed should look into getting these poor kids some education on what to go to college for then

the biggest problem the US has had is for a long time now they have just basically given anyone any loan they wanted

this was a deliberate move by the banks, interest for life is guaranteed money

**Frazzled**

dogma wrote:
Ouze wrote:The tradeoff, of course, is that since these loans are not guaranteed by the US government they must be guaranteed by you: expect to need either excellent credit or a co-signer and somewhat higher interest rates. The choice is yours.

Indeed. Bonus points if your cosigner is on his deathbed. At which point "Garnish what?" is a fabulous option.

Frazzled wrote:
I never said you couldn't get a private student loan (good luck trying though).

Really? I started undergrad in 2004, and of the 120k in student loans I owed ~70k were private and only ~15k were cosigned (by someone who is now dead). I'm an exception in that I paid all my loans off within 4 years, but for most people those loans are lifelong yokes; which benefits the lender.

Were those student loans unsecured and unguaranteed? I doubt that bigtime.

**dogma**

Frazzled wrote:
Were those student loans unsecured and unguaranteed? I doubt that bigtime.

They were cosigned by a, now dead, relative who we knew was not long for this world. Basically we took the bank for a ride, but they got their money anyway so it was win-win.

**Frazzled**

dogma wrote:
Frazzled wrote:
Were those student loans unsecured and unguaranteed? I doubt that bigtime.

They were cosigned by a, now dead, relative who we knew was not long for this world. Basically, we took the bank for a ride.

So they were guaranteed by a credit worthy counter. Now try to get an unguaranteed unsecured student loan.