If you’ve been eye-balling early retirement but still owe on your student loans, you might want to think again. According to new reports, your Social Security benefits might be garnished to cover the bill.
An uncomfortably increasing number of retirees find themselves in student loan default, and are seeing a big chunk of their monthly Social Security checks disappear into the coffers of the federal government. Ever since January, the fed has seized funds from over 100,000 retiree Social Security checks – twice as many as they seized in 2011, according to MarketWatch. The amount withheld by the fed varies from person to person, but goes as high as 15%. In dollars and cents for the average Social Security monthly benefit, it’s a dock of about $190 from $1,234.
“This is going to catch an awful lot of people off guard and wreak havoc on their financial lives,” says financial planner Sheryl Garrett.
At this point, you might be asking yourself why retirees are still making student loan payments when they presumably haven’t been in college for 30 years or more. Well, the sad irony is that most affected retirees are not in any personal debt over tuition expenses – rather, they helped foot the bill to pay for their children’s college loans, and are still saddled with the credit hit from that, according to SmartMoney.
The government is trying to amend this problem by offering debtors two options: one, to set up payment plans before the Social Security cuts hit retirees, and two, a pledge to not touch Social Security checks totaling $750 or less.