Haunted by Student Debt to the Grave

Mary

Green

Swig Steven L.

Swig Roger

Hickey

It will not be news to 41 million Americans that this nation is in the middle of a student debt crisis. That's the number of people burdened by student loan payments. But many people, including many student debt holders, may be surprised to learn that people can be pursued for student debt even into their elder years.

In fact, the government is withholding Social Security payments for some retirees because their student loans have not been fully repaid. This is a growing problem that Sens. Elizabeth Warren (D-Mass.) and Claire McCaskill (D-Mo.) have asked the government to study in greater depth.

“Garnishing Social Security benefits defeats the entire point of the program — that’s why we don’t allow banks or credit card companies to do it,” said Sen. McCaskill. “Social Security is the sole means of retirement income for tens of millions of Americans, and allowing those benefits to be garnished to collect student loan debt cuts a dangerous hole in our safety net.”

That is one problem with this practice. But, as we will see, there are others.

Many people will be surprised to learn that any seniors are still paying off their student debt. They are: 706,000 households headed by someone 65 or older are still paying off their student debts, according to a report by the GAO. Collectively these households owed $18.2 billion in 2013. That's six-and-a-half times as much as they owed in 2005, when these senior households’ total debt obligation was “only” $2.8 billion.

Of those households, 191,000 – more than one in four – are in default. The government can take up to 15 percent of a Social Security check to pay back a student loan, as long as the monthly check amount does not drop below $750 a month.

Social Security payments could not be seized for any reason until – for the first time ever -- Congress created an exception for student debt in 1996. Before then, Social Security was protected from garnishments of any kind. That was deliberate. The original Social Security Act of 1935 stated that benefits were not “subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”

The government doesn't have to go to court, either. It requires a court order to garnish a working person's wages, but Social Security benefits are entirely under federal control. Many people have learned they still owed student debt only after a portion of their Social Security check had been taken.

These seniors’ benefits are not being garnished to pay loans they took out for their kids, either. The GAO found that four out of five seniors in this category owed the money for their own education, not their children's. In many cases these loans were incurred and the defaults arose (with subsequent interest and penalty fees) years before the government assumed the power to reach into seniors’ retirement income to collect them.

While the total number of seniors losing benefits today is relatively small (it was 155,000 in 2013), this problem threatens to grow larger as our overall student debt problem continues to grow. What's more, the moral dimensions of this problem are quite large.

The fact that this problem even exists suggests that we've lost our national perspective on education. Student debt is a historical anomaly in this nation's history. We were primarily an agrarian nation until the developments of the 20th century gave rise to a new economy in which far more people needed a higher education.

But with that shift came a rise in publicly funded higher education at the state level. The rise of the conservative movement in the latter part of the last century led to state budget cuts and massive tuition increases. The result was skyrocketing student debt for public as well as private college students.

Now there is a growing movement for tuition-free or very low-cost public higher education – a return to the principle, established in the not-too-distant past, that all qualified students should have access to debt-free higher education. If that movement is successful – and we believe it will be – then today's runaway student debt problem will eventually fade away.

But that will leave two generations of Americans condemned to pay an extremely high price for having been unlucky enough to attend college during the conservative period during which all but the wealthiest students were required to take on debt in order to get an education.

We believe that all Americans should be freed from the burdens of this aberrational period of student debts – and that a “student debt jubilee” would be good for the U.S. economy and for the work and family lives of graduates. But perhaps that jubilee can proceed in stages.

There is already a widespread call – partially successful so far – to forgive the debts of students who were ripped off by for-profit universities, like Corinthian – colleges that encouraged them to take student loans, delivered a terrible education, and are now going belly-up.

And surely America can and should establish the principle that, having been forced to take on debt during this aberrational period, those Americans who reach the age of 65 and are depending on Social Security for most of their income should not have to continue to pay off what remains of student loans from their Social Security checks.

There will be those who say that a debt is a debt and must be repaid. But it is a long-standing legal principle that failure to collect a debt over an extended period of time renders it uncollectible. What's more, we are actually treating people more harshly for seeking to finance an education than for financing a house or car. Where is the sense in that?

The solution seems obvious: First, we must stop the practice of garnishing Social Security payments to pay student debt. Then we must take a long, hard look at all the student debt that has been accumulated in this country. For millions of Americans, a college education is the ticket to a better life.

Nobody should be deprived of an education because they don't come from a wealthy family. And nobody should be subjected to onerous debt because they dared to dream and desired to learn.