Social Security Checks Raided To Pay for Student Loans

Tea Party Economist

Recently by Gary North: Keynesianism vs. the Gold Coin Standard


Retired parents or grandparents who helped their children get through college by borrowing money, but who did not repay the money, are now facing automatic deductions. The lenders go to Social Security. The Social Security Administration then orders a monthly deduction program. The money is automatically deducted and sent to the lender.

People thought they could beat the system if the could just make it to retirement. No such luck. The banks just get in line. They get paid first.

In 2012 so far, 115,000 retirees have had their monthly payments reduced in this way. This is almost twice the number of people hit in 2011, and the year is not over yet. It was 60,000 in 2007. The number will start rising fast as baby boomers retire.

How much money does the SSA skim off? Up to 15%. For people who are dependent on SS for their income, this is a big hit. They did not budget for paying it back when they still were in the labor force. Now they are retired.

Many of these retirees aren’t even in hock for their own educations. Consumer advocates say that in the majority of the cases they’ve seen, the borrowers went into debt later in life to help defray education costs for their children or other dependents.

This was truly dumb. They paid for part of their children’s inflated college tuition costs. None of this was necessary. The kids could have gotten their degrees for under $15,000. Now the parents or grandparents are trapped.

Harold Grodberg, an elder law attorney in Bayonne, N.J., says he’s worked with at least six clients in the past two years whose problems started with loans they signed up for to help pay for their grandchildren’s tuition. Other attorneys say they’re working with older borrowers who had signed up for the federal PLUS loan — a loan for parents of undergraduates — to cover tuition costs.

The number of these people will grow. Earlier this year, a total of 2.2 million people 60 years old or older were still in hock for college loans.

Congress changed the law in 1996 to allow Social Security to raid monthly checks in advance. How many people know this? Not many. Now millions of them are going to find out. Congress passed a law to that effect even earlier: the Higher Education Technical Amendments Act. If borrowers owe $60,000 or more, the time limit goes to 30 years. Another eight years can be added on for borrowers facing unemployment or other economic hardship; during those years, payments aren’t required but interest accrues.

Withholding extends even to disability benefits.

Student loan debt is a killer. Avoid it.

Continue Reading related article on

August 10, 2012

Gary North [send him mail] is the author of Mises on Money. Visit He is also the author of a free 31-volume series, An Economic Commentary on the Bible.

Copyright © 2012 Gary North