Submitted by the Bond & Botes Law Offices - Friday, October 3, 2014
A recent government audit performed by the government accountability office (GAO) and reported by Huffington Post found many senior Americans are being driven into poverty due to the demands for payment by the education department on defaulted student loans. The study also found that Americans over the age of 75 who have student loan debt, over 50 percent have loans in default. A default generally means the loan is more than 360 days past due.
Pursuant to a recently initiated collection initiative, over 22,000 American age 65 and older had their social security benefits garnished to collect student loan debt and another 83,000 or so, age 64 or younger, were left with reduced social security benefits due to defaulted student loans. In total, benefits to social security recipients were reduced almost $150 million due to the education loan garnishments last year. Although the number of households headed by senior Americans that owe student loan debt may be a small percentage, the amount of student loan debt seems to be significant. Not all of the debt was incurred for seniors’ own benefit, only about 80%. The rest is for loans that were taken out to help children through school.
With very little increase in employee pay across the country and a slow growing economy, the $1.3 trillion education debt will become more of a problem and, as today’s workers age, they will become part of the growing problem. Younger Americans who are still working are facing reduced retirements as many are cutting spending and retirement contributions in order to pay their educational loans and other bills. Borrowers generally incur student loan debt trying to make life better and improve their earning potential. They never dream that these loans could be their financial undoing in their “golden years.”
Generally, student loans are not dischargeable in any form of bankruptcy. There are many advocates pushing our nation’s leaders to change this portion of the current bankruptcy law but, unfortunately, it does not look like that will change anytime soon. In the meantime, a borrower may be able to get some relief within a chapter 13 debt consolidation bankruptcy. This form of bankruptcy can be used as a tool to stop administrative wage garnishments or pay a portion of the loan over time. It may also be helpful to an individual to seek bankruptcy assistance on other debts that can be discharged in bankruptcy so that one can refocus his or her efforts on paying back the student loan obligations.
If you are struggling with any financial difficulty, please give our office nearest to you a call and schedule a free consultation with one or our attorneys to discuss what options may be available to you.