Get an online or B&M degree, default on your loan, lose Social Security.

Interesting data from SmartMoney.com. Retirees defaulting on their student loans are facing Social Security garnishments on a larger scale than ever before. It's heartless, especially if someoneone is depending on that check to survive, but I can see the cold logic in it. How can you expect the government to give you more money when you already have defaulted on what you owe them?

From the article:

"According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just 6 cases in 2000."

 

It is heartless, but I think it is fair. If you think about it, defaulting your student loan is the same thing as using your social security up front.

 

Whether one defaults at 24, 44 or 64, the principle is the same. The taxpayer ends up covering the cost. IMHO, student loans are often far too easy to get, with little attention given (other than one's signature) to one's projected ability to pay off the loan. I've been on both sides. I assumed a student loan for the last half of a grad degree, then an additional loan for the full tuition of a professional doctorate. Instead of taking the full ten years to pay back the loan, I was able to pay it off in three years. Certainly, not all can do that, but if I assume the loan, I am responsible for it.

 

I would gladly forgoe social security and not repay my loans if they would quit holding money out of my check. When they take it they call it a "tax" yet when they are supposed to pay it suddenly it's an "entitlement". They should all go to prison for what they've done to Social Security...hell, Madoff did.

 

Is there an exception if the person took SSI and retired early due to disease/disability? If so, then this is fair. If not, then it's draconian, IMHO.

 

Hopefully, the accounts are using inflated dollars to deduct the appropriate amount of the loan. :naughty:

 

Actually, if you are using inflated dollars, it would not be the appropriate amount because the loan already has accrued interest factoring into the payments.

 

This is why banks and other lenders love student loans so much. With auto loans or mortgages -- in fact, any other kind of loan -- there's a risk that they might lose money if the borrower defaults. But with student loans, the taxpayers -- not the banks -- are on the hook in case of default. The lenders can't lose.

 

That is a good point. There is very little risk when the government is guaranteeing the loan. A homeowner can file bankruptcy but the taxpayers are never off the hook.