In what could be a complicated situation for thousands of people, senators have been warning that older Americans could lose their Social Security benefits if they don’t comply with a new requirement that has become an elephant in the room.
In a serious warning, Democratic senators wrote a letter to the Social Security Administration (SSA), with a copy to the Treasury and Education Departments, urging them to take urgent and serious measures to curb the risk to which thousands of individuals are now exposed: they could lose their retirement benefits if they do not finish paying their student loans. As you read it: There are retirees who still owe student loans.
Why Millions of Retirees Could Lose Their Social Security Benefits
Failure to meet payment schedules under the Treasury Compensation Program (TOP) is a grim reality for many Social Security recipients. This implies that up to 15% of their monthly benefits could be taken away, leaving them in an even more precarious situation. This measure, backed by Massachusetts Senator Elizabeth Warren, Oregon Senator Ron Wyden and other lawmakers, has raised serious concerns.
The letter, signed by these prominent 14 lawmakers, details the disproportionate impacts TOP has on older borrowers. These individuals, already facing numerous financial difficulties, are hit harder by a system that seems to take no account of their circumstances. The shadow of uncertainty and economic instability hangs over those whose incomes are threatened by this relentless policy.
Afterwards, the legislators ask the responsible entities that the retirement, survival, and disability benefits of Social Security be exempt from these collections linked to student loans.
According to a study by the liberal think tank New America, there were more than 3.5 million Americans aged 60 and older with unpaid student debt in 2023, a number of debtors six times higher than in 2004. The cumulative amount of the total debt amounts to a whopping $125 billion, an increase 19 times larger than in 2004.
In the same time period mentioned, there was a significant increase in the number of Social Security beneficiaries whose benefits were cut because they did not pay their student loans on time. While in 2002 there were about 36,000 people who were affected by such situations, in 2015 there were over 173,000 individuals, according to a Government Accountability Office.
Should Social Security Beneficiaries Keep Paying Their Student Loans?
The situation gets worse when you keep reading the statistics: roughly 44% of borrowers who were 50 years and older at the time of their initial offset were subject to this maximum Social Security benefit withholding.
“Offsetting Social Security benefits can push beneficiaries closer to – or even into – poverty,” the letter reads. They said the collections also undermine the “Social Security Act’s mission of providing for “the general welfare,” basic economic security, and the well-being of vulnerable Americans.”
The quick answer to that question is, yes, they should keep up with their loan payments, because Congress ended the pause on loan and interest payments that was in effect during the COVID-19 pandemic. Since October 2023, those collections resumed those collections, and it’s never a good idea to fall behind on a debt payment, it doesn’t matter if you’re a retiree or not.
Since that same year, President Joe Biden has been trying to advance plans to cancel and reduce student debt under his Saving on a Valuable Education Plan (SAVE).
