A SENIOR has been left in a difficult financial position after her Social Security benefits started vanishing.
After nearly 40 years, an unpaid bill finally caught up to her, significantly reducing her payments.
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Despite working “ridiculous hours” and staying on a budget to make ends meet and pay down any outstanding debts, 73-year-old Christine Farro told AP News that it was never enough.
“I worked weekends and nights. But I could never pay it off.”
That unpaid bill was, like for many Americans, student loans.
Farro was a single mother when she started pursuing a bachelor’s degree in developmental psychology several decades ago.
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At the time, she couldn’t work enough and balance school to pay tuition and fees off entirely, and took out loans.
She even later went back to get a master’s degree to try to earn more to pay the debt off.
Unfortunately for the California resident, the salary didn’t cover it, and in 2008, she consolidated her loans with monthly payments of around $1,000.
After several years of missed payments, the total owed was nearly $250,000.
When she retired after a career as a child welfare worker, the student loans started eating into her Social Security benefits.
Checks were automatically reduced to pay off the balance.
Farro had a brief break with student loans being paused by the federal government in 2020 during the height of the coronavirus pandemic, but the grace period ended in 2023.
COLLECTING UNDERWAY
With the Trump administration announcing it would start pursuing those with defaulted student loan debts through involuntary collections earlier this month, Farro’s Social Security benefits will likely remain cut.
The Education Department confirmed it would take wages, tax refunds, retirement, and disability to cover the debts.
Farro isn’t alone, either, as those 60 and older still have an estimated $125 billion in student loan debt, per the National Consumer Law Center, which is about six times higher than what it was 20 years ago.
HOW TO SUPPLEMENT YOUR SOCIAL SECURITY
Here’s how to supplement your Social Security:
Given the uncertainty surrounding Social Security’s long-term future, it’s essential for workers to consider ways to supplement their retirement income.
Senior Citizens League executive director, Shannon Benton recommends starting early with savings and investing in retirement accounts like 401(k)s or IRAs.
- 401(k) Plans
- A 401(k) is a retirement account offered through employers, where contributions are tax-deferred.
- Many employers also match employee contributions, typically between 2% and 4% of salary, making it a valuable tool for building retirement savings.
- Maxing out your 401(k) contributions, especially if your employer offers a match, should be a priority.
- IRAs
- An Individual Retirement Account (IRA) offers another avenue for retirement savings.
- Unlike a 401(k), an IRA isn’t tied to your employer, giving you more flexibility in your investment choices.
- Contributions to traditional IRAs are tax-deductible, and the funds grow tax-free until they are withdrawn, at which point they are taxed as income.
Between 2001 and 2019, retirees who had their benefits cut due to student loans went from 6,200 to 192,300, according to data from the Consumer Financial Protection Bureau.
This year, about 452,000 Americans over the age of 62 have student loans that are in default.
That includes Debbie McIntyre, 62, a teacher in Kentucky.
McIntyre explained to AP that her husband had been out of a job and living on disability for 20 years, and with the collection and their rent being increased by $300 at the end of the couple’s lease, there were few options left.
“I don’t know what more I can do,” she said.
“I’ll never get out of this hole.”
Additionally, federal law only protects $750 per check from Social Security benefits being reduced due to debts owed.
EXPERT’S INSIGHTS
Braxton Brewington, a staff member at the Debt Collective debtors’ union, said the situations he encounters are sometimes dire.
“We hear from people who skip meals. We know people who dilute their medication or cut their pills in half,” Brewington told The Daily Mail.
“People take drastic measures like pulling all their savings out or dissolving their 401ks. We know folks who have been driven into homelessness.”
Brewington argued that many seniors he works with should’ve already had their debts cancelled or paid back their principal amounts, but still owe due to considerable interest and fees.
A Social Security age rule also begins in November for millions of Americans, but it could result in more cash in their pocket this time.
Some perks from Social Security have also expanded over the years, with select Americans even getting paid to play golf in retirement.
