Discharge of your federal student loan will not affect the benefits you receive. For further information regarding the student loan forgiveness, cancellation, and discharge program, please contact the Department of Education.
By law, Social Security can take retirement and disability benefits to repay student loans in default. Social Security can take up to 15% of a person"s benefits. However, the benefits cannot be reduced below $750 a month or $9,000 a year. Supplemental Security Income (SSI) cannot be offset to repay these debts.
Your student loans won't be automatically forgiven when you retire.
Social Security won't count federal education loans (like parent PLUS, Perkins, or Stafford loans) or any other loan made under Title IV of the Higher Education Act as income or resources (assets). Other education-related resources, such as grants, are also excluded as long as they're used for tuition and fees.
Potentially the most significant drawback of student loan forgiveness is the taxes. With a few exceptions, including PSLF, the IRS considers the amount of your forgiven balance to be taxable income. Depending on how much is forgiven, that could amount to tens of thousands of dollars you owe in taxes.
If your student loan debt is completely forgiven, your credit score may take a small, temporary hit. Additionally, while your debt relief won't be subject to federal income taxes, it may still be taxed at the state level.
If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount. If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2024, that limit is $22,320.
While you may have heard at some point that Social Security is no longer taxable after 70 or some other age, this isn't the case. In reality, Social Security is taxed at any age if your income exceeds a certain level.
At what age do student loans get written off? There is no specific age when students get their loans written off in the United States, but federal undergraduate loans are forgiven after 20 years, and federal graduate school loans are forgiven after 25 years.
Eventually, they age into one of the fastest growing subsets of student loan borrowers—adults approaching retirement age. Borrowers who still carry debt from their own education well into their senior years often attended low-value programs that did not provide enough support to help them reach graduation.
There are no federal student loan forgiveness programs specifically for senior citizens. Retirees are eligible for the same loan forgiveness programs as other borrowers. The three primary programs that help elderly borrowers get rid of student loans are: Public Service Loan Forgiveness (PSLF)
The number of people age 60 and older who still have student loan debt has sextupled since 2004 to 3.5 million, and the amount they owe is up 19-fold to $125 billion. Older Americans with student loan debt take second jobs, delay retirement, are less likely to own their own homes and suffer low credit scores.
Social Security and Social Security Disability Insurance (SSDI) can sometimes be garnished to pay money you owe to the government, such as back taxes or federal student loans, and money you owe for child or spousal support.
Federal income retirement benefits are protected from commercial garnishment through the federal Consumer Credit Protection Act. This means Social Security and other federal benefits can't be garnished by credit card companies, for medical bills, and other commercial creditors.
Relief Measures
The Fresh Start Program provides relief for borrowers with eligible defaulted loans, including a pause on garnishment until at least September 2024.
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
You would not be required to file a tax return. But you might want to file a return, because even though you are not required to pay taxes on your Social Security, you may be able to get a refund of any money withheld from your paycheck for taxes.
Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a return for tax year 2023 (which is due in 2024) if your gross income is $15,700 or higher.
Social Security will take into consideration the amount of your assets, because it is a needs-based program. To be eligible for SSI, your assets must be less than $2,000 for an individual and less than $3,000 for a married couple. However, not all assets count towards the resource limits.
For the earnings limits, we don't count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.
Income limitations: Selling your home does not directly impact your eligibility for Social Security benefits. However, if you earn income from the sale, it could potentially affect the taxation of your benefits or eligibility for certain assistance programs.
Tax Treatment of Forgiven Debt
Aside from potentially damaging your credit, student loan forgiveness can complicate your tax situation. The IRS views forgiven debt as taxable income unless it meets specific exemptions or exclusions.
Student loans disappear from credit reports 7.5 years from the date they are paid in full, charged-off, or entered default. Education debt can reappear if you dig out of default with consolidation or loan rehabilitation.
In most cases, the borrower no longer had any outstanding student loan reported on their credit record in February 2023, suggesting the loan may have been paid off, discharged, or aged off the borrower's credit record.