How Do Unpaid Student Loans Impact Social Security Benefits?

Student debt has been rising dramatically over the past few decades, including among older adults. While the overall magnitude of student debt held by those ages 65 and over is not large, the debt burden in this group has been growing rapidly. At the same time, their default rates have also been rising. This trend is a particular concern because retirees with delinquent student loans can have part of their Social Security benefits withheld to pay for the loans. Such withholding may disproportionately harm disadvantaged groups as they are more likely to have delinquent loans. This brief, based on a recent study, addresses two key questions: 1) What is the impact of student debt on current and future retirees’ financial security? and 2) How would it change under the Biden administration’s recently proposed debt relief plan? The discussion proceeds as follows. The first section provides background on older Americans with student debt and on the Biden administration plan. The second section describes the data and methodology for the analysis. The third section presents the results. The final section concludes that, while the f inancial consequences of student debt delinquency are relatively small for current Social Security beneficiaries, such debt is concentrated among disadvantaged groups and it may hit future beneficiaries harder. As expected, the proposed debt relief plan would substantially reduce student debt for all, while benefiting Black and Hispanic borrowers the most.