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Student Loan Payments May Be Withheld from Your Social Security Check

If you're a parent or grandparent considering taking out student loans for a college-bound student, here's something that will make you think twice. Older adults who've fallen behind on federal student loans risk getting smaller Social Security benefits because the federal government is withholding a portion that money -- and the number of people in this situation is increasing.

From January 1 through August 6, the government reduced the amount of Social Security payments of about 115,000 retirees, nearly double the 60,000 cases in all of 2007 and just six cases in 2000. The Treasury Department  compiled these figures at the request of, which recently published the results.

Some are people who took on debt to go back to school at a later age. Others co-signed a loan for a child or grandchild and got stuck with the payments.

Sadly, this seems to be the tip of the iceberg. Recent research from the Federal Reserve Bank of New York shows that more than 6 million Americans 50-plus are still paying off student loans. In the third quarter of 2011, about 17 percent were late or delinquent on their payments.

If they don't find a way to pay that debt before they claim Social Security retirement benefit, they could be facing cuts as high as 15 percent, or $190 from a benefit of $1,234. Recipients who collect $750 a month or less won't be docked, according to the SmartMoney report.

Meanwhile, the amount of outstanding student loan debt in this country, an astounding $1 trillion, continues to threaten the financial well-being of  young  and old alike, with no end in sight. Soaring tuition places a huge burden on college graduates who face paying back their loans while they struggle to find work in the worst jobs market this country has seen in decades.

And many older adults -- contrary to financial advisers' recommendations -- put their own retirement security at risk to help ease their kids' burden.

Earlier this year, Senate Majority Whip Dick Durbin (D-Ill.) told AARP that he wants borrowers to be able to get rid of private student loan debt if they declare bankruptcy. He says private student loans, which are not government-sponsored, should be dischargeable like other kinds of loans.

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