Noting that 43 million Americans (with that number increasing) are shouldering a $1.5 trillion (and growing) burden, the responsibility of that debt on the individual carrier is going to become a bigger talking point as economic uncertainty continues.
While this latest generation of borrowers typically skew younger, there is a group of Americans over 50 that may be carrying as much as $260 billion in student debt.
What Happens in Student Loan Default?
If you are unable to pay your loans and an income-driven plan isn’t working either, your loans may go into default and the government has a range of tools available to try and collect those outstanding balances.
Social Security payments can be garnished if you do end up defaulting on student loans, in what’s called an “offset”. There are limits to what can be garnished and it’s important to know what they are.
Lending Tree notes that the Debt Collection Improvement Act of 1996 sets a limit of 15% of your Social Security benefits being garnished to put towards student loan repayment. However, you are allowed to keep a minimum of $750 per month.
What Do Garnished Wages Go Towards?
According to the same story, most of the money taken from Social Security payments doesn’t even go towards the principal. $1.1 billion was garnished from benefits in 2016 and more than 70% had gone to paying off fees and interest rather than the debt itself.
It’s worth noting that those on permanent disability may be eligible for a full discharge of certain loans as well as those with a qualifying long-term medical condition.
As student loans continue to be a pressing issue in many older American’s minds, it’s important to understand what your rights are when it comes to Social Security benefits. Call the qualified Social Security claims team at Drew L. Johnson, P.C. today at (541) 434-6466 to arrange a free initial consultation if you’re facing loan default, benefit garnishment or other financial hardship.