There’s an old saying regarding two certainties in life: Death and taxes. As it turns out, you can also be pretty certain of another: The U.S. government is probably never going to forgive your student loan debt.
In fact, not only with the government hound you throughout all your working years – no matter how little you actually earn – you can bet calls for payback won’t end when you retire. That’s due to legislation passed by Congress in 1996. The little-known law gives the government the power to garnish the wages of Social Security checks (paid to those over the age of 65) for student loan debts.
As of right now, according to a new report from the Government Accountability Office, there are approximately 700,000 senior citizens receiving Social Security who still have student loan debt. Of those, more than a quarter are in default and are having their monthly stipends garnished to repay those loans. The government takes 15 percent of the total, assuming that leaves the retired worker with at least $750 a month.
The total amount of student loan debt still outstanding for senior citizens is more than $18 billion. That was as of 2013. Compared to what that number was in 2005, it’s a 650 percent increase.
Worse, that figure is only going to increase. That’s because the cost of higher education has only gotten more expensive in recent years. Plus, wages are stagnant. Even those who graduate and get a decent job are going to struggle to pay loans off in a timely manner. If one gets hit with a lay-off, divorce or serious illness, playing catch-up can be trying.
Many of those who are elderly and still owe are those who continued their education later in life. A recent survey from Bankrate.com indicated a third of those in that age group say they wish they had gotten better advice or information regarding the financial risks.
This is not to say a loan can never be forgiven, but it won’t be easy.
Usually, the first thing the government will do is work on a repayment plan based on income. This is not generally done, but it can be in cases of financial hardship or when borrower can show he or she is on a fixed income (i.e., subsists on Social Security). Usually, these repayment plans span about 20 years. They can go on for as long as 25 years. Only at the end of that period can the borrower apply to have the remainder of the loan forgiven.
Our Miami debt defense lawyers know that where loan repayment is income-based, borrower pays 10 to 15 percent of discretionary income, taking into account only income that exceeds the poverty level. So if one’s total income was at or below the poverty line, his or her monthly payment would be 0, but the loan would still remain current. This is key because if the loan isn’t considered “current,” that’s when the government can take action to garnish Social Security checks.
It’s worth noting that bankruptcy doesn’t necessarily wipe the slate clean when it comes to student loans. Whereas most other debts are automatically discharged through this process, the same is not said for student loans. Borrowers can file paperwork with the government to prove undue hardship, but this is a very difficult threshold to meet. The government will analyze:
- Whether the borrower cannot maintain a minimal standard of living based on current income, loan debts and expenses;
- The borrower’s past, present and anticipated future financial resources to determine ability to pay.
If you need assistance requesting student loan forgiveness, call our offices today to learn more about how we can help.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.
Never too old for student debt, Aug. 5, 2015, By Jennie L. Phipps, Bankrate.com
More Blog Entries:
Report: Housing Debt Saddles Older Americans, June 20, 2015, Miami Student Debt Lawyer Blog