Student debt threatens the safety net for elderly Americans


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Until his Social Security check arrived nearly $300 lighter last June, Eric Merklein, 67, had no idea that he was carrying outstanding student debt. Merklein eventually learned that the government was taking money from his Social Security payments to repay loans he took out roughly four decades ago; he had thought they were paid. Merklein was unemployed, and the garnishment amounted to one-sixth of his total monthly income.

“‘You gotta be making this up,’” Merklein says he thought, at first. “The fact that they didn’t even call me or send me a postcard saying they were going to be doing this, I mean, it’s just nuts.”

Merklein is one of a growing number of Americans aged 50 and older who haven’t finished paying their student loans. Student debt is growing faster for seniors than for any other age group, according to the latest data gathered by the Federal Reserve Bank of New York.

Lingering student loan debt is part of a broader and, many elder-care lawyers say, devastating accumulation of debt among older Americans.

While people aged 50 and older hold only 17 percent of all U.S. student debt, this group has nearly three times as much debt as it did in 2005, according to the New York Fed data. By comparison, student debt for people under 40 is about one and a half times as high it was then.

The numbers don’t distinguish between older Americans who took out loans to finance their education and those who did so to put their children through college. A Gallup report released this month showed that people who took out loans decades ago are more likely to report low levels of health and financial well-being than their debt-free peers are.

For older Americans, owing for government-backed student loans can be particularly tough. Unlike other kinds of debt, including private student loans, collectors of federal student loan debt have the power to garnish income, block benefits, and withhold tax rebates. As a result, some older borrowers are seeing part of their Social Security payments seized and their wages cut off just when they are especially vulnerable.

Before Merklein went on Social Security in 2013, he was sure he didn’t have to worry about the money he borrowed from the government in 1970 to fund his undergraduate education. In the early 1970s, he says, his grandmother handed him an envelope with a note and a receipt that said the loan was paid in full. But Merklein lost the envelope—“I probably lost it within 48 hours, being a twentysomething at that time,” he says.

Now, nearly four decades after he went to college, the debt is haunting him. Merklein says that an agency collecting debt on the part of the government informed him that it has no record of the payment and that his loan accumulated interest for decades and went into default. He owed over $20,000, including collection costs, the agency said.

He spent hours speaking on the phone with debt collectors and says the government has stopped taking money out of his Social Security payments. He’s now paying $50 per month so that his loan can be transferred to a government repayment plan. He still worries about the Department of Education seizing his income without warning.

“They could come after me today,” he says. “And I would have no recourse.”

Garnishing social security checks is just one tactic the government can use to recoup money it is owed. Lawmakers gave federal officials far-reaching powers of debt collection two decades ago, after the largest federal loan guarantor collapsed and a congressional investigation revealed that schools were fraudulently receiving millions in federal grants.

Default rates have dropped by half since then, thanks in part to the government policies. But critics worry that the policies may also have crippled some who have no way to shake their debt, says Ben Miller, a senior policy analyst at the New America Foundation.

Some seniors are saddled with loan payments for an education that never led to stable employment. Debbie Crotinger, 55, borrowed around $10,000 to attend Garden City Community College in Garden City, Kans., in the early 1990s. She was going to college for the first time, fresh out of a marriage to a man she says was routinely abusive.

Crotinger never finished her degree because she couldn’t keep up with a full time job and the demands of childcare. She says she held minimum wage jobs for years while she looked after three kids. Now the government is garnishing about $235 per month from her $1200 monthly paycheck to pay off a loan that hovers around $40,000 with interest.

“They’re killing me,” Crotinger says, “I don’t know what to do about it. I figure I will be paying it off the rest of my life.”

Crotinger lives with her mother in Watonga, Okla., who is in her eighties, and says that after paying for her mother’s necessities, she has around $150 a month to pay for gas and other personal expenses. Crotinger’s only lifeline is the $40,000 in her late husband’s retirement account, but she hasn’t touched it.

“I am afraid to claim it because I’m afraid they’ll take it,” she says, referring to the government. She says she wouldn’t be able to forgive herself if the money didn’t make it to her four children. “It’s not much, but it would help the kids out,” she says.

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