Mar 20, 2024 - Politics & Policy

Millions of seniors behind on student loans risk losing Social Security, lawmakers warn Biden

Illustration of money being sucked into the void of a black hole.

Illustration: Aïda Amer/Axios

Millions of older Americans are at risk of losing some of their Social Security benefits after defaulting on student loans, Democratic lawmakers said in a letter urging the Biden administration to act.

Why it matters: Seniors are one of the highest risk categories with reports showing nearly 40% of borrowers aged 65 or older in default. Federal programs that claw those funds back mean seniors lose as much as $2,500 in Social Security benefits annually.

  • Sens. Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.) and U.S. Reps. Ayanna Pressley (D-Mass.), Pramila Jayapal (D-Wash.), Raúl Grijalva (D-Ariz.) and John Larson (D-Conn.) led the effort in a Tuesday letter, which gathered over 30 total signatures.
  • More than 3.5 million Americans at or above the age of 60 hold student loan debt, collectively amounting to over $125 billion, per 2023 data from the think tank New America that lawmakers cited.

Catch up quick: Under the Treasury Offset Program (TOP), the federal government can collect tax refunds and benefits, such as Social Security, from those with outstanding student loans, per Federal Student Aid.

  • The lawmakers expressed concerns that "older borrowers are disproportionately subject to TOP collection," per the letter addressed to the Social Security Administration, Treasury Department and Education Department.
  • The program allows for up to 15% of monthly federal government benefits, including Social Security and disability payments, to be withheld, lawmakers said.
  • They noted that "roughly 44 percent of borrowers who were 50 years and older at the time of their initial offset were subject to this maximum Social Security benefit withholding."

Zoom out: There has been a sharp increase in the number of older Americans nearing retirement with federal student loan debt.

  • In fact, the number of borrowers aged 60 or above has grown six-fold since 2004, New America said in its 2023 study.
  • The think tank also found the outstanding debt of those 60 years old and above to have increased 19-fold since then.

The Biden administration has now provided almost $138 billion in student loan relief for nearly 4 million total student borrowers after canceling another $1.2 billion in student loans in February.

Go deeper: Biden cancels another $1.2 billion in student loans

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