When President Obama endorsed going back to school shortly after he came into office, very few Americans understood what the full ramifications of this would be. Coupled with the fact that under Obama, the government has taken over the Student Loan industry, millions of Americans have become debt slaves to Uncle Sam.
And to deal with the 30% of student loan debtors who are delinquent in their payments, the government has moved towards stricter ways of getting its money back, and this now includes withholding Social Security payments to worthy recipients.
It's no secret that falling behind on student loan payments can squash a borrower's hopes of building savings, buying a home or even finding work. Now, thousands of retirees are learning that defaulting on student-debt can threaten something that used to be untouchable: their Social Security benefits.
According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just 6 cases in 2000.
The amount that the government withholds varies widely, though it runs up to 15%. Assuming the average monthly Social Security benefit for a retired worker of $1,234, that could mean a monthly haircut of almost $190. "This is going to catch an awful lot of people off guard and wreak havoc on their financial lives," says Sheryl Garrett, a financial planner in Eureka Springs, Ark.
Many of these retirees aren't even in hock for their own educations. Consumer advocates say that in the majority of the cases they've seen, the borrowers went into debt later in life to help defray education costs for their children or other dependents. Harold Grodberg, an elder law attorney in Bayonne, N.J., says he's worked with at least six clients in the past two years whose problems started with loans they signed up for to help pay for their grandchildren's tuition. Other attorneys say they're working with older borrowers who had signed up for the federal PLUS loan -- a loan for parents of undergraduates -- to cover tuition costs. Other retirees took out federal loans when they returned to college in midlife, and a few are carrying debt from their own undergraduate or graduate-school years. (No statistics track exactly how many of the defaulting loans fall into which category.) - Smart Money
Over 100,000 social security recipients have had their benefits withheld in 2012 because of student loan delinquencies they have incurred, or they are bound to from co-signing with someone else. And with the fact that nearly 50% of all Americans age 18-24 are unable to find jobs to pay off those loans, finding mercy with Uncle Sam is an fruitless activity because while your Pastor might give you remission for your choices, the government rarely forgives.