The U.S. student loan debt recently reached $1 trillion, with many borrowers in default. In response, the federal government is now seizing social security benefits of retirees who have not, or cannot, pay their student debt.
To make matters worse, many of these retirees aren't in debt for their own educations, but rather because they helped on education costs for their children, grandchildren, or other dependents.
The amount that the government withholds varies widely, though it runs up to 15%. Assuming the average monthly Social Security benefit for a retired worker of $1,234, that could mean a monthly haircut of almost $190. "This is going to catch an awful lot of people off guard and wreak havoc on their financial lives," says Sheryl Garrett, a financial planner in Eureka Springs, Ark.
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Roughly 2.2 million student-loan debtors were 60 and older during the first quarter of 2012, and nearly 10% of their loans were 90 days or more past due, up from 6% during the first quarter of 2005, according to the Federal Reserve Bank of New York. "It's really a unique problem we haven't had to face before, and it's only going to grow," says Robert Applebaum, founder.