Biden Administration Under Fire: Elderly Americans Brace For DRASTIC Cutbacks In Social Security Payouts

By Jennifer Wentworth | Friday, 29 March 2024 11:59 PM
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Biden Administration Under Fire: Elderly Americans Brace For DRASTIC Cutbacks In Social Security Payouts

Democratic legislators, including Senators Elizabeth Warren of Massachusetts and Ron Wyden of Oregon, have issued a stark warning to the Biden administration regarding the potential reduction of Social Security benefits for millions of older adults who are in arrears on their student loans.

In a letter penned on March 19, the lawmakers highlighted the severity of the situation, stating, "When borrowers are in collections, on average their Social Security benefits are estimated to be reduced by $2,500 annually." They further emphasized the devastating impact of such reductions on those who depend on Social Security as their primary income source.

The U.S. government possesses exceptional collection powers over federal debts, enabling it to confiscate borrowers' tax refunds, wages, and retirement benefits. The lawmakers pointed out that Social Security recipients could see up to 15% of their benefit reduced to repay their defaulted student debt. Such a scenario, they warned, "can push beneficiaries closer to — or even into — poverty."

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Following the expiration of the pandemic-era pause on student loan payments in October last year, the U.S. Department of Education announced a 12-month suspension of its collection practices. However, the lawmakers expressed concern that "borrowers will face the extreme consequences associated with missed payments when protections expire in late 2024." They have requested a briefing from the Biden administration on its efforts to address this issue by April 3.

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The U.S. Department of Education has yet to respond to requests for comment. However, a source familiar with the department's plans informed CNBC that the government's collection practices with student loan borrowers, including the garnishment of wages and Social Security benefits, are currently under review.

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The lawmakers' letter also highlighted the escalating issue of outstanding student debt among older individuals. They cited that more than 3.5 million Americans aged 60 and older held student debt in 2023, marking a sixfold increase from 2004.

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Consumer advocates have criticized the government's collection actions as extreme. Higher education expert Mark Kantrowitz stated, "Many retirees need their Social Security benefits to survive." He pointed out that Social Security benefits constitute nearly all income for one-third of recipients over the age of 65. The average check for retired workers is $1,907 this year, according to the Social Security Administration.

Kantrowitz further noted that the garnishments often force older adults to make difficult choices, such as "skipping meals or rationing medicine." He condemned the policy as "morally bankrupt."

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