26 CONSUMER FINANCIAL PROTECTION BUREAU
for older borrowers whose only source of income is Social Security, particularly where these
loans were used to finance their own education.
50
Consider the case of a retiree whose income is
limited to only her $1,165 monthly Social Security check, which is the median Social Security
benefit for an older consumer that depends on Social Security for all of her income.
51
If this
retiree has defaulted on a federal student loan, the government can deduct or “offset” $60 from
her monthly Social Security benefit, reducing her annual income to $13,240. However, by
rehabilitating or consolidating her defaulted student loans, this same borrower would no longer
be subject to the Social Security offset and would also become eligible for an income-driven
repayment plan. Given her low income, the IDR payment formula would set her monthly
payment amount to $0.
52
As policymakers examine potential changes to the higher education finance market, including
changes to federal student loan programs, this report can offer insight into how changes in the
availability of borrowing and repayment options may affect the long-term financial well-being of
older consumers.
50
Monthly payment relief options are limited for those older borrowers who are struggling to repay the
Parent PLUS loans they took out to pay for their children’s college education. Under federal law, Parent
PLUS loans are ineligible for enrollment in most of the income-driven repayment plans offered by the
federal student loan programs. Still, reduced-payment plan options are available for Parent PLUS loans,
including defaulted loans that have been rehabilitated or consolidated. The options for Parent PLUS
borrowers include one IDR option as well as graduated and extended repayment plans.
51
See SSA, Office of Retirement and Disability Policy, Income of the Population 55 or Older, 2014,Table
5.A5, https://www.ssa.gov/policy/docs/statcomps/income_pop55/
(last visited Dec. 29, 2016)(reporting
percentage distribution of Social Security beneficiary units, by proportion of aged unit income from Social
Security and marital status).
52
See, e.g., 34 C.F.R. § 685.209(c) (Revised Pay As Your Earn). Another contributing factor to the
difficulties that Social Security beneficiaries face with defaulted student loans is that the calculation for
offsets has not been updated since 1996. The Debt Collections Improvement Act of 1996 introduced a
$9,000 annual exemption of federal benefit payments subject to offset. 31 U.S.C. § 3716(c)(3)(A)(ii) (Apr.
29, 1996).