More seniors on hook for student loans

WASHINGTON - Rosemary Anderson could be 81 by the time she pays off her student loans. After struggling with divorce, health problems and an "underwater" home mortgage, the 57-year-old anticipates there could come a day when her Social Security benefits will be docked to make the payments.

Like Anderson, a growing percentage of aging Americans struggle to pay back their student debt. Tens of thousands of them even see their Social Security benefits garnished when they cannot do so. A new analysis by the U.S. Government Accountability Office found that more than 700,000 families headed by someone 65 or older carries federal student loan debt.

Between 2004 and 2010, the share of older Americans with student loan obligations quadrupled, while the total amount owed also surged. Four percent of people ages 65 to 74 carried student loan debt, up from 1 percent six years earlier, according to the GAO report, which was released Wednesday at a Senate Aging Committee hearing. For all seniors, the collective amount of student loan debt grew from about $2.8 billion in 2005 to about $18.2 billion last year. Student debt for all ages totals $1 trillion.

Older people with student debt are also more likely to have defaulted on these loans, which the agency said can cause some retirees to tumble into poverty. Student loans are hard to refinance at a lower interest rate, while in contrast to other kinds of debt such loans generally can't be forgiven if a person declares bankruptcy.

Under a 1998 law, seniors who default on a student loan can have their Social Security benefits reduced to as little as $750 a month. More than 150,000 older Americans had their Social Security checks docked last year for delinquent student loans, according to an analysis of government data by CNNMoney.

"Some may think of student loan debt as just a young person's problem," said Sen. Bill Nelson, D-Fla., chairman of the committee. "Well, as it turns out, that's increasingly not the case."

Anderson, of Watsonville, California, amassed $64,000 in student loans, beginning in her 30s, as she worked toward her undergraduate and graduate degrees. She said she has worked multiple jobs -- she's now at the University of California, Santa Cruz -- to pay off credit card debt and has renegotiated terms of her home mortgage, but hasn't been able to make a student loan payment in eight years. The amount she now owes has ballooned to $126,000.

"I find it very ironic that I incurred this debt as a way to improve my life, and yet I still sit here today because the debt has become my undoing," Anderson said in prepared testimony for the hearing.

Despite not making payments, she's managed to keep the education debt in good standing, she said.

Ed Boltz, a bankruptcy attorney in Durham, North Carolina, who is president of the National Association of Consumer Bankruptcy Attorneys, said in an interview that many of the seniors he sees with student loan debt are also struggling with challenges such a medical problems, job loss or divorce. Some, he said, went back to school with hopes of making a higher salary and that didn't pan out, or the children they helped fund to attend school are not in a position to help the parent in return.

"They are stuck with these debts and they can't try again," Boltz said. "There's no second act for them. It holds off on people retiring."

The GAO found that about 80 percent of the student loan debt by seniors was for their own education, while the rest was taken out for their children or other dependents. It said federal data showed that seniors were more likely to default on loans for themselves compared with those they took out for their children.

It's unclear when the loans originated, although the GAO noted that the time period to pay back such debt can range from a decade to 25 years. That means some older Americans could have taken out the loans when they were younger and they've accumulated with interest, or got them later in life, such as workers who enrolled in college after a layoff in the midst of the economic downturn.

A recent study by the Urban Institute found that the median debt held by seniors rose from about $13,600 in 1998 to $21,200 in 2010.

The GAO found that about a quarter of loans held by seniors ages 65 to 74 were in default. The number of older Americans who had their Social Security benefits offset to pay student loan debt increased about fivefold, from 31,000 to 155,000, from 2002 to 2013.

"As the baby boomers continue to move into retirement, the number of older Americans with defaulted loans will only continue to increase," the GAO said. "This creates the potential for an unpleasant surprise for some, as their benefits are offset and they face the possibility of a less secure retirement."

In addition to docking Social Security, the government can use a variety of tools to recoup student loans, such as docking wages or taking tax refund dollars.

Sandy Baum, a senior fellow at the Urban Institute, said these seniors having their Social Security docked likely don't have much discretionary income and Congress should consider taking away this option. There's a limit to how much Social Security can be docked, but some seniors are left with benefits below the poverty level, the GAO said.