From the U.S. Government Accountability Office, www.gao.gov Transcript for: Relief for Older Americans with Student Loans Description: Audio interview by GAO staff with Allison Bawden, Director, Education, Workforce and Income Security Related GAO Work: GAO-17-45: Social Security Offsets: Improvements to Program Design Could Better Assist Older Student Loan Borrowers with Obtaining Permitted Relief Released: December 2016 [ Background Music ] [ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. It's December 2016. Millions of Americans over age 50 have student loan debt and an increasing number of older Americans have defaulted on their loans. One way that the federal government recovers this debt is by withholding a portion of Social Security, or other federal payments, and putting that money toward an individual's loan balance. A team led by Allison Bawden, a director in GAO's Education Workforce and Income Security team, recently looked at older adults' loan debt and the Social Security offset program. Jacques Arsenault sat down with Allison to talk about what they found. [ Jacques Arsenault: ] When we talk about student loans and student loan debt, I often think about Americans in their 20s or 30s, but your report looked at older Americans and their student loan debt. Can you tell me what you found? [ Allison Bawden: ] Americans over 50 who have student loan debt are often headed toward retirement or may already be in retirement and so having those student loans can either affect their ability to save or affect their income once they're already in retirement. In 2015, 7.2 million Americans over 50 had student loans and about 2.1 million of those were actually in default on those loans. [ Jacques Arsenault: ] So how does default on a student loan impact an older American? [ Allison Bawden: ] For older Americans with defaulted student loans, declaring bankruptcy generally does not result in having that debt forgiven. Taxpayers have an interest in folks repaying those loans, if they possibly can, and so the government has developed a program for recouping that debt by withholding funds from federal payments those in debt might otherwise receive. Those kinds of federal payments include, for example, tax refunds. Or in the case that we looked at, Social Security payments. [ Jacques Arsenault: ] So, in looking at this population with older Americans that are facing default and these offsets, can you give me a ballpark of how big of a population we're talking about in terms of individuals or amount of money? [ Allison Bawden: ] In 2015, there are about 114,000 Americans over the age of 50 who's Social Security benefits were being reduced to repay student debt. [ Jacques Arsenault: ] Were you able to tell if this offset program is helpful in getting the loans paid off and getting people out of that default status? [ Allison Bawden: ] It's pretty mixed. For about a third of folks, at the end of five years, they were either able to repay their loan or bring their loan back into good standing, meaning they were paying on their own without the need for offsets. But for another third of folks, they remained in offset after five years. And some of them actually had seen their loan balances increase. That increase results because they often have to pay fees and interest and those get paid first out of the offset payment rather than applying the payment to principal. [ Jacques Arsenault: ] So, they may not be getting down to that principal at all, or at least not as fast as the interest and the fees are continuing to rise? [ Allison Bawden: ] That's right, especially if their benefit is relatively small and therefore, their offset payment is relatively small. [ Jacques Arsenault: ] So, you also looked at some options for relief for certain individuals. Can you talk about the relief programs that you looked at? [ Allison Bawden: ] The primary program we looked at is known as the Total and Permanent Disability Discharge Program. It's run through the Department of Education. And through that program, individuals with serious disabilities for whom medical improvement is not expected, they may apply to have their loan forgiven. There's a three-year monitoring period to verify their income and at the end of the three years, their loan may be forgiven. We looked at how the Department of Education implements that program and we found that there was a lot of room for improvement, particularly in the way it communicates with borrowers about the importance of submitting income information every year during that three-year period. [ Jacques Arsenault: ] So, do you have to submit the documentation every year in order to stay in the program? [ Allison Bawden: ] You have to submit the documentation every year for three years, and then you will be approved for the discharge provided the information all lines up. What we found actually is that during that three-year monitoring period, a lot of people-60,000 plus a year-were being reinstated simply for failing to submit the form. [ Jacques Arsenault: ] So, can you talk about the recommendations that GAO's making in this report? [ Allison Bawden: ] GAO is making a series of recommendations to the Department of Education. The recommendations are focused on improving the way it administers various relief options and communicates with borrowers about them. We also identify ways that the Department of Education could automate its process for verifying income by using income information other federal agencies, such as, for example, the Social Security Administration, likely already have. In addition, GAO is suggesting to the Congress that it consider adjusting the $750 minimum monthly Social Security benefit for offset to reflect cost of living. [ Jacques Arsenault: ] So, then finally, what would you say is the bottom line of this report? [ Allison Bawden: ] Well, when somebody takes out a student loan, taxpayers have a strong interest in seeing that that loan is repaid, but older Americans' experiences with Social Security offsets to repay these students debts are really mixed. For about a third, offsets do achieve a desired outcome in that after five years, loans are repaid, or they're being repaid. But for about another third, the offsets have little to no effect on individual student loan balances. Sometimes those balances even increase and while doing so, potentially create financial hardship by reducing Social Security benefits below the poverty guideline. We tried to lay out all these different scenarios, as well as a lot of new data to give policymakers better information on how older American student debt can affect their income security in retirement. [ Background Music ] [ Narrator: ] To learn more, visit GAO.gov and be sure to tune in to the next episode of GAO's Watchdog Report for more from the congressional watchdog, the U.S. Government Accountability Office.