For example, borrowers of any age  receiving Social Security disability benefits are eligible for a Total and  Permanent Disability (TPD) discharge if SSA has determined that they  have a disability for which medical improvement is not expected. Education’s Collection Efforts in Fiscal Year 2015

According to Education data for fiscal year 2015, about $4.5 billion was  collected by Education, private collection agencies, and guaranty  agencies on defaulted federal student loans, excluding loan  rehabilitations and consolidations. Growth in Social Security Offsets and Prevalence of Disability Benefits

In addition, our analysis of data we linked from Education, Treasury, and  SSA shows that the number of borrowers, especially older borrowers,  who have experienced offsets of Social Security benefits to repay  defaulted federal student loans has increased over time. Three-quarters of older borrowers owed loans only for their own  education, and most owed less than $10,000 at the time of their initial  offset. The typical monthly offset was slightly more than $140 for older  Americans, and almost half of those had the maximum possible  reduction, equivalent to 15 percent of their Social Security benefit  payment. Many Older Americans Had Held their Student Loans for 20 Years or More at the Time of Initial Offset

About 43 percent of older student loan borrowers with a Social Security  offset had held their student loans for 20 years or more, and about 80  percent had held their loans for 10 years or more. According to linked  data from the Treasury Offset Program, Education’s National Student  Loan Data System, and the Social Security Administration from fiscal  years 2001 through 2015, the length of time borrowers had held student  loans that were in default at the time of their first Social Security offset  payment varied as shown in figure 3. Most Older Americans Subject to Social Security Benefit Offset Took Out Loans for Their Own Education and Owed Less than $10,000 at the Time of Initial Offset

Older borrowers who became subject to Social Security offsets  predominately defaulted on loans for their own education. Many Older Americans Subject to Social Security Offset for Student Loan Debt Have the Maximum Amount Withheld

About 44 percent of borrowers 50 and older at the time of their initial  offset saw the maximum possible amount of their Social Security benefit  withheld, equal to 15 percent of their benefit payment. Over a 5 year time period after becoming subject  to Social Security offset, nearly one-third of older borrowers were able to  pay off their loans or obtain a disability discharge. However, other older  borrowers remained in default on their student loans, and some had their  loan balances increase over time despite the reductions to their Social  Security benefits. Such is the case for a growing number of older  borrowers whose Social Security benefits have fallen below the poverty  guideline because the offset threshold is not adjusted for increases in  costs of living. Consequently,  an increasing number of older Americans subject to Social Security  offsets received benefits below the federal poverty guideline. Many Older Borrowers Subject to Offset May Be Eligible for a Total and Permanent Disability Discharge under Education’s Process but Have Not Applied

Older Americans subject to Social Security offset may be eligible to have  their student loan debt discharged because they are severely disabled. Specifically, documentation provided by  Education to borrowers in the 3-year monitoring period does not clearly  and prominently state all requirements to report income annually. This relief option is also available to  borrowers under age 50. Appendix I: Objectives, Scope, and Methodology

Our objectives for this review were to examine: (1) characteristics of  student loan debt held by older borrowers subject to offset and the effect  on their Social Security benefit, (2) the amount of debt collected by the  Department of Education (Education) through offsets and the typical  outcomes for older borrowers; and (3) effects on older borrowers as a  result of program design for offsets and related relief options.
Why GAO Did This Study

An increasing number of older Americans have defaulted on their federal student loans, which are administered by Education, and have a portion of their Social Security retirement or disability benefits withheld above a minimum benefit threshold to repay this debt. Given that Social Security is the primary source of income for many older Americans, GAO was asked to review these withholdings, known as offsets.
GAO examined: (1) characteristics of student loan debt held by older borrowers subject to offset and the effect on their Social Security benefit; (2) the amount of debt collected by Education through offsets and the typical outcomes for older borrowers; and (3) effects on older borrowers resulting from the program design of relief options. GAO examined data from fiscal years 2001 through 2015 from Education's National Student Loan Data System and other administrative data from Treasury and SSA. GAO also examined aggregated data provided by Education and Treasury, reviewed documentation, and interviewed agency officials about Education's processes for providing relief from offset.

What GAO Found

Older borrowers (age 50 and older) who default on federal student loans and must repay that debt with a portion of their Social Security benefits often have held their loans for decades and had about 15 percent of their benefit payment withheld. This withholding is called an offset. GAO's analysis of characteristics of student loan debt using data from the Departments of Education (Education), Treasury, and the Social Security Administration (SSA) from fiscal years 2001-2015 showed that for older borrowers subject to offset for the first time, about 43 percent had held their student loans for 20 years or more. In addition, three-quarters of these older borrowers had taken loans only for their own education, and most owed less than $10,000 at the time of their initial offset. Older borrowers had a typical monthly offset that was slightly more than $140, and almost half of them were subject to the maximum possible reduction, equivalent to 15 percent of their Social Security benefit. In fiscal year 2015, more than half of the almost 114,000 older borrowers who had such offsets were receiving Social Security disability benefits rather than Social Security retirement income.
In fiscal year 2015, Education collected about $4.5 billion on defaulted student loan debt, of which about $171 million—less than 10 percent—was collected through Social Security offsets. More than one-third of older borrowers remained in default 5 years after becoming subject to offset, and some saw their loan balances increase over time despite offsets. However, nearly one-third of older borrowers were able to pay off their loans or cancel their debt by obtaining relief through a process known as a total and permanent disability (TPD) discharge, which is available to borrowers with a disability that is not expected to improve.
GAO identified a number of effects on older borrowers resulting from the design of the offset program and associated options for relief from offset. First, older borrowers subject to offsets increasingly receive benefits below the federal poverty guideline. Specifically, many older borrowers subject to offset have their Social Security benefits reduced below the federal poverty guideline because the threshold to protect benefits—implemented by regulation in 1998—is not adjusted for costs of living (see figure below). In addition, borrowers who have a total and permanent disability may be eligible for a TPD discharge, but they must comply with annual documentation requirements that are not clearly and prominently stated. If annual documentation to verify income is not submitted, a loan initially approved for a TPD discharge can be reinstated and offsets resume.

What GAO Recommends

GAO suggests that Congress consider adjusting Social Security offset provisions to reflect the increased cost of living. GAO is also making five recommendations to Education, including that it clarify documentation requirements for permitted relief resulting from disability. Education generally agreed with GAO's recommendations.