The voices of Urban Institute's researchers and staff
September 10, 2014

Why we shouldn’t garnish Social Security benefits to pay for student loans

September 10, 2014

 In 2013, 156,000 individuals had their Social Security benefits garnished to collect $150 million in defaulted federal student loans. This is a tiny fraction of the 63.7 million Social Security recipients, but that average of about $1,000 a year could make a real difference for affected senior citizens or disabled adults surviving on Social Security.

For most beneficiaries, the average monthly payment of $1,200 is the primary source of income. Among elderly beneficiaries, 52 percent of married couples and 74 percent of unmarried individuals receive 50 percent or more of their income from Social Security. It is not easy to know the characteristics of the individuals actually affected, but it would not be surprising if many of those whose benefits are garnished are among the 22 percent of married couples and 47 percent of unmarried recipients who rely on the program for 90 percent or more of their income.

There is no statute of limitations on garnishing Social Security payments to collect on federal student loans, although there is a limit of 15 percent of the monthly benefit, which cannot drop below $750 as a result.

The practice of garnishing Social Security for student debt payments does raise a small amount of revenue, and perhaps fear of garnishment (if it were widely publicized) could encourage some people to pay off their debts when they are due. But it seems very likely that the practice does more harm than good.

Fundamentally, the federal government is correct to hold student loan borrowers responsible for their debts. Calls to forgive all or most student debt ignore many facts. When borrowers default on federal student loans, all taxpayers—including many who have never been to college and have more limited earning opportunities than most of those who have—are left holding the bag.

Paying off student loans is no more onerous than paying off equal amounts of loans for other important expenditures. We know that students who don’t complete degrees are disproportionately likely to default on their student loans, but there is no good evidence that shows how many people default because their education did not pay off in the labor market and they really can’t afford to pay, and how many have prioritized other spending and could pay if they really believed it was important.

But garnishing Social Security benefits? There may be a few older people who are living well and just not paying their debts. And we should be sure that we don’t automatically forgive the debt of people who borrow for school after they are 55 years old. But it’s pretty likely that most Social Security recipients who still have student debt and have struggled financially in the past don’t have much discretionary income.

There is a lot of discussion about how to ease the burden on people repaying student loans. Strengthening the income-dependent repayment plans now in place would help many people who are struggling because of circumstances beyond their control. Some other proposed solutions would provide large subsidies to people who really don’t need them, at least relative to the taxpayers who would pick up the tab. But Social Security recipients are an easy group to rally behind, and protecting them would not require a big hit to the federal budget.

Garnishing Social Security payments to collect on student loans really isn’t worth it. It doesn’t put much of a dent in the outstanding debt, but it can create serious problems for the individuals affected. We need to find better-targeted ways of addressing the problems of unmanageable debt and nonpayment.

Photo: 2013 college graduates. (AP Photo/Jessica Hill)

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