Older Americans Plagued by Student Loans – Is Your Social Security Being Garnished?

Older Americans are hard hit by student loans. Find out how to end this pain.

Image source: Flickr User Phil Roeder

Federal student loans are a great way for many to get a college education and greatly improve their lot in life. But for some, student loans are a trap that can ruin their lives. Student loans from the government have no statute of limitations and are tricky to discharge in bankruptcy. For those that can't afford them, student loans can become a lifelong nightmare. Increasingly, many older Americans are being hard hit by educational debt that is pushing them to the brink of poverty.

Defaulted student loans can trigger social security garnishment

Although wage garnishment in North Carolina is not a remedy available to most creditors, it is for federal student loans. Loan servicers can garnish up to 15% of your wages or Social Security without taking you to court first in order to collect past due balances. For those living on fixed incomes, this can quickly become a financial nightmare. If you've defaulted on your student loans, this could happen.

Defaulted student loans can cause tax refund seizure

Federal student loan servicers have collection methods open to them that no other creditor can access. In addition to garnishment, if you have defaulted on your loans (i.e. gone nine months or more without making a payment), loan servicers can take your tax refund each and every year and won't hesitate to do so. If you rely on this money, this can be disastrous, yet inevitable.

Many seniors are facing college debts for kids and grandkids

In addition to student loans taken out for their own behalf, seniors may take out PLUS loans to help their kids and then these adult children can't afford to pay back the loans. This can happen when they are still juggling college debts of their own, compounding their dire financial situation. And when retirement comes with a fixed income, these debts may simply be insurmountable.

Other financial problems can compound the debt crisis of older Americans

One of our attorneys, Ed Boltz, is president of the National Association of Consumer Bankruptcy Attorneys and was recently interviewed by the Associated Press about this critical issue. Boltz said, “Many seniors we see in our offices struggling with student loan debt are also dealing with challenges such as medical problems, job loss or divorce.”

He added, “Some went back to school when there were older to try and make a higher salary and it didn't work out or their children they helped through college aren't able to help pay back those loans. Because of their age, they are stuck with these debts and they can't try again. There's no second act for them.” This is unfortunate and can leave those on a limited income struggling unfairly.

Hope for those dealing with student loan garnishment

A new option has just been made available to try and bring defaulted student loans back to current that may help some seniors to get out of this predicament. The process of getting loans back in good shape is called rehabilitation, but prior to this July, it was nearly impossible to accomplish for those with limited means that most needed help. However, recent changes have made rehabilitation possible for many borrowers.

You can apply to make income-sensitive payments to rehabilitate your loans. If you are subsisting just on social security, this would mean payments of just $5 a month could rehab your loans. After five of these modest payments, you can apply to end your garnishment. After 10 of these small payments, your loans will be considered rehabilitated and you can apply for Income Based Repayment, which offers payments as low as $0 per month.

Contact us for a free consultation about your debt

If student loans aren't your only financial problems, the North Carolina bankruptcy experts at the law offices of John T Orcutt can help. For seniors, a Chapter 7 bankruptcy can wipe out lingering unsecured debts like credit cards and medical bills to free up your finances. Plus filing bankruptcy will temporarily stop your student loan garnishment and give you a chance to take advantage of the new student loan rehabilitation plan so you can have the financial fresh start you deserve. Contact us now for a free consultation.