GAO-17-45
SOCIAL SECURITY
OFFSETS
Improvements to
Program Design
Could Better Assist
Older Student Loan
Borrowers with
Obtaining Permitted
Relief
Report to Congressional Requesters
December 2016
United States Government Accountability Office
United States Government Accountability Office
Highlights of GAO-17-45, a report to
c
ongressional requesters
December 2016
SOCIAL SECURITY OFFSETS
Improvements to Program Design Could Better Assist
Older Student Loan Borrowers with Obtaining
Permitted Relief
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.
Impact of Offsets on Older Borrowers’ Social Security Benefits
View GAO-17-45. For more information,
contact
Allison Bawden at (202) 512-7215 or
.
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 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.
Page i GAO-17-45 Social Security Offsets
Letter 1
Background 3
Older Americans Often Had Held Student Loan Debt for Decades
Prior to Offset, and Many Had the Maximum Possible Amount
Withheld through Social Security Offset 11
Social Security Offsets Were a Small Share of Education’s
Collections and Primarily Paid down Fees and Interest as Many
Borrowers Remained in Default after 5 Years 17
Program Design May Impact Retirement Security for Older
Borrowers, Including Those Seeking Relief Permitted for
Permanent Disability or Financial Hardship 26
Conclusions 42
Matter for Congressional Consideration 44
Recommendations for Executive Action 44
Agency Comments and Our Evaluation 44
Appendix I Objectives, Scope, and Methodology 47
Appendix II Additional Data Analysis of Student Loan Debt for Older Americans 52
Appendix III Supplemental Data Analysis Tables for Older Americans with Student
Loan Debt 59
Appendix IV Copy of Education’s Total and Permanent Disability Servicer’s Form for
Annual Income Verification 75
Appendix V Comments from the Department of Education 78
Appendix VI Comments from the Social Security Administration 81
Contents
Page ii GAO-17-45 Social Security Offsets
Appendix VII GAO Contact and Staff Acknowledgments 82
Tables
Table 1: Voluntary and Involuntary Options to Repay Defaulted
Federal Student Loans 4
Table 2: Social Security Benefits of Older Americans Subject to
Offset Compared to Overall Benefit Distribution 16
Table 3: Average Student Loan Balance of Borrowers 50 and
Older, by Loan Status 58
Table 4: Incidence of Debt by Age of Head of Household and
Type of Debt, 2013 59
Table 5: Number of Student Loan Borrowers Less than Age 50 by
Type of Loan and Status, Fiscal Years 2005 to 2015 60
Table 6: Number of Student Loan Borrowers Age 50 to 64 by Type
of Loan and Status, Fiscal Years 2005 to 2015 60
Table 7: Number of Student Loan Borrowers Age 65 and Over by
Type of Loan and Status, Fiscal Years 2005 to 2015 61
Table 8: Outstanding Federal Student Loan Balances by Age
Group from Fiscal Years 2005-2015 61
Table 9: Student Loan Balances of Borrowers Under 50 When
First Subject to Offset, Fiscal Years 2006 to 2015 62
Table 10: Student Loan Balances of Borrowers 50-64 When First
Subject to Offset, Fiscal Years 2006 to 2015 62
Table 11: Student Loan Balances of Borrowers 65 or Older When
First Subject to Offset, Fiscal Years 2006 to 2015 63
Table 12: Average Student Loan Balance of Borrowers Under 50,
By Loan Status, Fiscal Years 2006 to 2015 63
Table 13: Average Student Loan Balance of Borrowers 50-64, By
Loan Status, Fiscal Years 2006 to 2015 64
Table 14: Average Student Loan Balance of Borrowers 65 and
Older, By Loan Status, Fiscal Years 2006 to 2015 64
Table 15: Share of Student Loan Borrowers with Various
Outcomes 5 Years after Their Initial Social Security Offset
by Age, Fiscal Years 2001 to 2010 65
Table 16: Share of Student Loan Borrowers with Various
Outcomes 5 Years after Their Initial Social Security Offset
by Duration of Offset, Fiscal Years 2001 to 2010 66
Table 17: Share of Borrowers Under 50 Whose Social Security
Benefits Are below the Poverty Guideline after Offset for
Defaulted Federal Student Loans, Fiscal Years 2001 to
2015 67
Page iii GAO-17-45 Social Security Offsets
Table 18: Share of Borrowers 50-64 Whose Social Security
Benefits Are below the Poverty Guideline after Offset for
Defaulted Federal Student Loans, Fiscal Years 2001 to
2015 68
Table 19: Share of Borrowers 65 and Over Whose Social Security
Benefits Are below the Poverty Guideline after Offset for
Defaulted Federal Student Loans, Fiscal Years 2001 to
2015 69
Table 20: Length of Time Borrowers Held Student Loans at Time
of Initial Social Security Offset, Fiscal Years 2001 to 2015 70
Table 21: Length of Time in Default Prior to Offset for Borrowers
Not Receiving Social Security Benefits At Time of Offset,
Fiscal Years 2004-2015 70
Table 22: Length of Time in Default Prior to Offset for Borrowers
Receiving Social Security Benefits At Time of Offset,
Fiscal Years 2004-2015 71
Table 23: Proportion of Social Security Offset Collections Applied
to Principal, Interest, and Fees on Defaulted Federal
Student Loans, Fiscal Years 2001 to 2015 71
Table 24: Share of Borrowers Paying Student Loan Principal Via
Social Security Offset, by Duration of Offset, Fiscal Years
2001 to 2015 72
Table 25: Number of Borrowers in Social Security Offset due to
Defaulted Federal Student Loans, by Benefit Type and
Borrower Age, Fiscal Years 2001 to 2015 73
Table 26: Age at Loan Origination For Student Loans Held at Time
of Initial Social Security Offset, Fiscal Years 2001 to 2015 74
Figures
Figure 1: Education’s Total Collections for Defaulted Student
Loans by Type of Collection Effort, Fiscal Year 2015 8
Figure 2: Number of Federal Student Loan Borrowers and Share
of Those in Default and Offset for Any Federal Payment
by Age, Fiscal Year 2015 10
Figure 3: Length of Time Older Borrowers Had Held Student
Loans At Time of Initial Social Security Benefit Offset,
Fiscal Years 2001 to 2015 12
Figure 4: Number of Borrowers Over 50 Becoming Subject to
Social Security Offset for the First Time, By Year and
Size of Loan Balance 14
Page iv GAO-17-45 Social Security Offsets
Figure 5: Distribution of Monthly Social Security Offset Amount for
Older Americans, Fiscal Years 2001 to 2015 15
Figure 6: Total Amount of Offset Collections for Education Debt
and Share Allocated to Treasury Offset Program Fees by
Type of Offset, Fiscal Year 2015 18
Figure 7: Length of Time Older Borrowers Were Subject to Offset
of Their Social Security Benefits for Defaulted Student
Loan Debt, by Borrower Age (2001 through 2010) 21
Figure 8: Share of Older Borrowers by Outcome 5 Years after
Initial Social Security Offset to Repay Defaulted Student
Loan Debt, Fiscal Years 2001 to 2010 23
Figure 9: Number of Borrowers Age 50 and Older Whose Social
Security Benefits Are below the Poverty Threshold after
Offset for Education Debt, Fiscal Years 2004 to 2015 28
Figure 10: Number of Reinstatements of Total and Permanent
Disability Discharges (TPD) during 3-year Monitoring
Period for Borrowers of All Ages by Reason, Fiscal Years
2014 and 2015 35
Figure 11: Application and Review Process for Hardship
Exemption or Reduction from Social Security Offset 40
Figure 12: Outstanding Federal Student Loan Balances by Age
Group for Fiscal Years 2005, 2010, and 2015 52
Figure 13: Percentage Increase in the Number of Borrowers and
their Outstanding Federal Student Loan Balances from
Fiscal Years 2005 to 2015 53
Figure 14: Number of Borrowers with Social Security Offsets
for Federal Student Loan Debt in Fiscal Years 2002
and 2015 55
Page v GAO-17-45 Social Security Offsets
Abbreviations
Education Department of Education
Fiscal Service Bureau of the Fiscal Service
IRS Internal Revenue Service
NSLDS National Student Loan Data System
SCF Survey of Consumer Finances
SSA Social Security Administration
TPD Total and Permanent Disability
Treasury Department of the Treasury
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Page 1 GAO-17-45 Social Security Offsets
441 G St. N.W.
Washington, DC 20548
December 19, 2016
The Honorable Claire McCaskill
Ranking Member
Special Committee on Aging
United States Senate
The Honorable Elizabeth Warren
United States Senate
A growing number of older Americans have student loan debt as they
near or enter retirement. Compared to younger borrowers, borrowers age
50 and older have considerably higher rates of default on federal student
loans. For those who are in default on their student loans, this debt is
generally not discharged in bankruptcy, and their Social Security benefits
may be reduced to repay this debt. Specifically, under the Treasury Offset
Program, the Departments of Education and Treasury coordinate to
withhold a portion of an individual’s Social Security retirement or disability
benefit to pay off their outstanding federal student loan debt—a process
known as administrative offset.
1
Agencies are required to refer such debt
to Treasury for offset under the Debt Collection Improvement Act of
1996.
2
GAO previously reported a substantial increase in the number of
individuals whose Social Security retirement, survivor, or disability
benefits were offset to repay student loan debt for borrowers of all ages,
including those aged 65 and older, from 2002 through 2013.
3
Concerns
have been raised about the impact of such offsets given that many older
Americans rely on Social Security payments for the majority of their
income. In addition, the number of those subject to offset may continue to
1
The Treasury Offset Program was established under the Debt Collection Improvement
Act of 1996 to centralize the collection of federal nontax debt, including defaulted federal
student loans, at the Department of the Treasury. In addition to Social Security benefits,
other federal payments, such as federal tax refunds, are subject to offset.
2
Pub. L. No. 104-134, § 31001, 110 Stat. 1321, 1321-358. The Debt Collection
Improvement Act of 1996, as amended, is currently codified in Chapter 37 of Title 31 of
the United States Code. References to the Debt Collection Improvement Act of 1996 are
to current law applicable to Treasury offsets in connection with federal student loans in
default.
3
GAO, Older Americans: Inability to Repay Student Loans May Affect Financial Security of
a Small Percentage of Retirees, GAO-14-866T (Washington, D.C.: Sept. 10, 2014).
Letter
Page 2 GAO-17-45 Social Security Offsets
increase as the total amount of federal student loan debt owed by
Americans grows, as does the number of borrowers.
You asked us to study Social Security offsets for older Americans with
defaulted student loan debt. In this review, we examine the experience of
older Americans subject to Social Security offsets, including: (1)
characteristics of student loan debt held by 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 those in offset; and (3) effects on older borrowers
as a result of program design for offsets and related relief options for
disability or financial hardship.
To examine the experience of older Americans who are subject to Social
Security offsets for defaulted federal student loan debt, we obtained
administrative data needed for our analysis from the Department of the
Treasury’s (Treasury) Bureau of the Fiscal Service (Fiscal Service),
Education, and the Social Security Administration (SSA). To conduct our
analysis, we linked the administrative data from Fiscal Service’s Treasury
Offset Program to data on borrowers’ student loans from Education’s
National Student Loan Data System (NSLDS) and borrowers’ Social
Security benefits from SSA’s Master Beneficiary Record and Disability
Control File spanning the timeframe from fiscal years 2001 through 2015.
We used the linked record-level data to determine how long borrowers
have held loans that became subject to offset, the length of time spent in
offset, the size of the reduction in Social Security income, and outcomes
for borrowers subject to offset 5 years later. We further analyzed the
linked data to determine the effect of Social Security offsets on the
balances of defaulted federal student loans, including the proportion of
offset applied to fees, interest, and principal. To provide information on
the overall population of student loan borrowers, we obtained aggregated
data from Education on the total number of borrowers in default and offset
by age.
In addition, we reviewed relevant federal laws, regulations, and
documentation and interviewed agency officials to obtain information
about offsets of Social Security benefits, as well as Education’s
processes for (1) discharging student loan debt in cases of disability
where the borrower is considered to have become totally and
permanently disabled, and (2) claiming an exemption or reduction from
offset due to financial hardship. To further examine the Total and
Permanent Disability (TPD) discharge process, we analyzed aggregated
data provided by Education’s TPD servicer on TPD discharge
Page 3 GAO-17-45 Social Security Offsets
applications, approvals, and reinstatements, including the total volume
and dollar value. To identify the amount Education collected on defaulted
federal student loans through offsets and other payment mechanisms, we
analyzed data provided by Education’s Default Resolution Group,
including aggregated data from the Debt Management and Collection
System and information reported by guaranty agencies. In addition, we
analyzed aggregated data provided by Fiscal Service on fees assessed
by the Treasury Offset Program for Social Security offsets for Education
and other federal agencies. We assessed the reliability of all the data
sources used in this review by reviewing documentation and conducting
testing of the data and as a result determined that they were sufficiently
reliable for purposes of this report. More details on our scope and
methodology are included in appendix I.
We conducted this performance audit from September 2015 to December
2016 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
Older Americans—those in or approaching retirement—and other
borrowers who default on their federal student loans are subject to a
number of actions by Education to recover outstanding debt.
4
Borrowers
may elect a voluntary repayment option to avoid involuntary collection
efforts, such as Social Security offsets. (See table 1).
4
For purposes of this report, we consider older Americans—those in or approaching
retirement—to be individuals age 50 and older. As noted in the report, we also distinguish
between older Americans who are age 50 to 64 and those who are age 65 and older at
the time of their initial offset.
Background
Page 4 GAO-17-45 Social Security Offsets
Table 1: Voluntary and Involuntary Options to Repay Defaulted Federal Student
Loans
Voluntary options – borrower agrees to repayment
Option
Description
Payment in full
Borrower agrees to pay the entire balance
owed
Compromise
Borrower agrees to a reduced overall
payment to satisfy the debt(s) in full
Loan consolidation
Borrower agrees to combine multiple
federal student loans into one loan and
resume repayment
Loan rehabilitation
Borrower agrees to make 9 on-time
monthly payments within 10 months
Involuntary options – federal government takes action to collect from borrower
Option
Description
Treasury Offset Program
After notification from the Department of
Education (Education), the Department of
the Treasury or states (through agreements
with the Department of the Treasury) offset
certain federal or state payments owed to
the borrower, such as federal or state
income tax refunds and Social Security
retirement or disability benefits
Wage garnishment
Education requires borrower’s employer to
withhold funds from borrower’s pay and
send the funds to Education
Litigation
After referral from Education, Department
of Justice begins litigation against the
borrower
Source: GAO summary of documentation from Education. | GAO-17-45
While Education administers federal student loans, other agencies may
become involved in the event that a borrower fails to make repayment.
For example, as described in table 1, Education coordinates with
Treasury to offset a portion of federal payments to borrowers who have
not made scheduled loan repayments. Federal payments subject to offset
include federal tax refunds, certain monthly benefits—such as Social
Security retirement and disability payments—and wages and retirement
benefits for federal employees.
5
The Debt Collection Improvement Act of
5
The Social Security benefits that Treasury offsets are Federal Old-Age, Survivors, and
Disability Insurance Benefits, issued under Title II of the Social Security Act. Treasury
does not differentiate among retirement, survivor, and disability benefits in administering
Social Security benefit offsets, since all of these benefits are eligible for offset.
Page 5 GAO-17-45 Social Security Offsets
1996 centralized the collection of nontax debt, including defaulted federal
student loans, at Treasury. Specifically, the Treasury Offset Program
within Fiscal Service carries out the transactions for offsetting all federal
payments for nontax debt.
6
Offsets for student loan debt through the
Treasury Offset Program began in 1999 and were first applied to Social
Security benefits starting in 2001.
7
After a defaulted loan is certified as eligible for offset, certain federal
payments, such as any available tax refunds, are offset immediately.
Borrowers with monthly federal benefits available for offset, such as
Social Security benefits, are informed by mail that their benefits will be
offset in 60 days and again 30 days before the offset is taken, allowing
borrowers an additional 2 months to resume payment on their loan before
offset begins. In addition, Education sends a notice which provides details
on the loans eligible for offset and describes options a borrower has to
avoid offset. Treasury assesses a fee for each offset transaction, which is
subtracted from the offset payment.
8
For fiscal year 2015, Treasury’s fee
was $15 for each monthly offset of benefit payments and $17 for a single
tax refund offset.
Monthly Social Security benefit payments that are eligible for offset are
the primary source of income for many older Americans at or near
retirement. According to the Social Security Administration (SSA), Social
Security benefits accounted for 90 percent or more of income for about 1
in 3 beneficiaries age 65 and older in 2014.
9
Social Security’s retirement
benefits, which individuals may claim as early as age 62, provide monthly
income based on an individual’s work and earnings history and are
intended to help ensure an adequate retirement income. Disability
benefits replace a portion of an eligible workers’ income if they are unable
6
Treasury also administers a separate but similar program, the Federal Payment Levy
Program (FPLP), to offset federal payments for delinquent federal tax debt. The Taxpayer
Relief Act of 1997 authorizes the Internal Revenue Service (IRS) to collect delinquent
federal tax debt by levying up to 15 percent of certain federal payments until the debt is
paid. In the event an individual owes both delinquent tax debt and non-tax debt,
delinquent tax debt will be collected first.
7
Previously, IRS administered tax refund offsets for student loan debt.
8
31 U.S.C. § 3716(c)(4). Treasury assesses a fee to Education for each offset, and
Education passes the fee on to the borrowers.
9
Social Security Administration, Fast Facts & Figures about Social Security, 2016.
Page 6 GAO-17-45 Social Security Offsets
to work due to a long-term disability.
10
When individuals receiving Social
Security disability benefits reach Social Security’s full retirement age—
currently age 66 for people born in 1943-1954—their benefits convert
from disability to retirement. Both types of monthly Social Security
benefits are eligible for offset if the beneficiary is in default on a federal
student loan. Social Security’s Supplemental Security Income benefits,
which provide monthly cash assistance for eligible individuals with limited
financial means, have been exempted from offset.
11
Certain borrowers may be eligible to discharge their federal student loan
debt because they are totally and permanently disabled, regardless of
whether or not they are in default. 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.
Borrowers who are approved for a TPD discharge are generally subject to
a 3-year monitoring period during which the discharged loans may be
reinstated for several reasons, including that the borrower earned income
over a specified threshold.
12
The value of the discharged loan is generally
treated as taxable income at the close of the 3-year monitoring period.
The Debt Collection Improvement Act of 1996 specified limits on the
amount that Treasury can offset from monthly federal benefits.
13
In 1998,
Treasury further exempted all but 15 percent of Social Security benefit
10
Adults are generally considered disabled if (1) they cannot perform work that they did
before; (2) they cannot engage in any other kind of substantial gainful work because of
their medical condition(s); and (3) their disability has lasted, or is expected to last, at least
1 year or is expected to result in death. 42 U.S.C. §§ 423(d) and 1382c(a).
11
Supplemental Security Income is a federal program funded by general revenue (not by
Social Security taxes) that provides monthly cash payments to aged (those 65 and older),
blind, and disabled people who have little or no income.
12
Veterans who qualify for a TPD discharge based on a VA determination of
unemployability due to a service-connected disability are not subject to a post-discharge
monitoring period. For borrowers who are subject to the 3-year monitoring period, loans
may be reinstated during this period for several reasons, including if the borrower’s
earnings from employment exceeds the poverty guideline amount for a family of two in
their state, if the borrower receives a new federal student loan, or if SSA determines that
the borrower is no longer disabled or that medical improvement is possible or likely for the
borrower’s disability.
13
Specifically, the Debt Collection Improvement Act of 1996 exempted benefit payments
totaling $9,000 over a 12 month period. This yearly amount is equivalent to $750 on a
monthly basis.
Page 7 GAO-17-45 Social Security Offsets
payments from offset. As a result, the amount of allowable offset is the
lesser of 15 percent of the monthly benefit payment, the amount by which
the benefit payment exceeds $750 per month, or the outstanding amount
of the debt.
14
For example, if a borrower with a Social Security benefit of
$1,000 per month owes more than $150 in student loan debt, the
borrower would have an offset of $150. This is because $150—equivalent
to 15 percent of the benefit—is less than the amount of the benefit over
$750, which is $250. In addition to the offset threshold, creditor agencies,
such as Education, are permitted to grant relief in cases of financial
hardship by certifying to Treasury that the offset allowable by law would
result in financial hardship.
15
Education established such a process in
2002 to grant financial hardship exemptions or reductions in offset.
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. About half of this amount came from
offsets of any federal payments through the Treasury Offset Program,
including but not limited to Social Security offsets (see fig. 1). Just over 30
percent of Education’s total collections came from administrative wage
garnishment, and about 20 percent came from voluntary payments made
by borrowers who may have been in the process of making the required
number of on-time monthly payments to eventually rehabilitate or
consolidate their loans and emerge from default.
16
According to Education
officials, borrowers may also make voluntary payments to avoid being
14
Monthly benefit payment refers to the amount of Social Security benefits paid to an
individual after any deductions, such as for Medicare Part B premiums.
15
31 C.F.R. § 285.5(d)(12). A creditor agency can certify to Fiscal Service that the offset
amount allowed by law would result in financial hardship to the debtor and that a lesser
offset amount is reasonable and appropriate based on the debtor’s financial
circumstances.
16
Borrowers who make at least three consecutive, voluntary, on-time full monthly
payments on certain defaulted student loans are eligible for direct consolidation loans
whereby they can pay off certain defaulted loans by consolidating them with one or more
Direct Loan Program or Federal Family Education Loan Program loans into a single loan
with a fixed interest rate. 34 C.F.R. §§ 685.102(b) and 685.220(d)(1). Some borrowers
who make nine on-time monthly payments during 10 consecutive months may be eligible
for loan rehabilitation, which allows them to have the default removed from their credit
history. 34 C.F.R. §§ 682.405(a)(2), (b)(1)(vi)(A) and 685.211(f)(1)(iv). However,
borrowers may only rehabilitate a loan once. 34 C.F.R. §§ 682.405(a)(4) and
685.211(f)(12).
Education’s Collection
Efforts in Fiscal Year 2015
Page 8 GAO-17-45 Social Security Offsets
subject to other collections actions, such as administrative wage
garnishment. In addition to these collections, Education publicly reports
recoveries from defaulted loans when they are successfully rehabilitated
or consolidated.
17
Figure 1: Education’s Total Collections for Defaulted Student Loans by Type of
Collection Effort, Fiscal Year 2015
Fewer older Americans hold student loan debt, but the rate of increase in
the number of older borrowers and the amount of their debt has far
outpaced younger borrowers. According to Education data for fiscal year
2015, there were about 37.4 million borrowers under age 50 compared to
about 6.3 million borrowers age 50 to 64 and 870,000 borrowers age 65
17
See ‘Default Recoveries by Private Collection Agency’ available at:
https://studentaid.ed.gov/sa/about/data-center/student/default. Rather than calculating the
value of loan payments collected over a specified time period, Education officials said that
published data on these types of recoveries include the entire value of the loans because
the loan balances are no longer recorded as being in default. In fiscal year 2015,
Education reported rehabilitated and consolidated defaulted loan balances that totaled
$6.9 billion and $1.2 billion, respectively.
Federal Student Loan
Debt and Rates of Default,
and Offset among Older
Americans
Page 9 GAO-17-45 Social Security Offsets
and older.
18
Since fiscal year 2005, these figures represented an increase
in the number of borrowers in the age 50 to 64 and 65 and older groups
of 119 percent and 385 percent, respectively. In comparison, the growth
rate for borrowers age 25 to 49 was 62 percent over this time period. The
corresponding increase in the amount of federal student loan debt held by
borrowers age 50 to 64 was from about $43 billion to $183 billion over this
decade, more than a three-fold increase.
19
Among borrowers age 65 and
older, the increase in the amount of federal student loan debt was even
larger— it grew from more than $2 billion in fiscal year 2005 to almost $22
billion in fiscal year 2015, about a ten-fold increase.
20
The loans on which
older borrowers have defaulted may have either been for their own
education or for their children’s education through Education’s Direct
PLUS Loan program.
21
In fiscal year 2015, compared to younger borrowers a greater share of
older borrowers were in default on their student loan debt and became
subject to offset from any federal payment, including federal tax refunds
18
According to 2013 data from the Survey of Consumer Finances (SCF), about 29 percent
of households headed by an individual age 35 to 44 held student loan debt compared to
about 12 percent for households headed by an individual age 55 to 64 and about 3
percent for households headed by an individual age 65 and older. These figures are
available at: Historic Tables and Charts,
http://www.federalreserve.gov/econresdata/scf/scfindex.htm. The 2013 SCF did not use
the phrase “student loans,” but rather asked respondents whether they have education
loans. Because of the inclusive wording of the question, the SCF data reflect both federal
and private loans. SCF survey responses are also based on the financial situation of an
entire household, not just the head of household. Because of this, it is possible that for
some households headed by older Americans, the reported student loan debt is held by
children or other dependents that are still members of the household. See appendix III,
table 4 for more detailed information from the 2013 SCF.
19
Over the same time period, the amount of federal student loan debt held by borrowers
age 25 to 49 increased by 187 percent. For more detailed information on the growth in the
number of borrowers and their outstanding federal student loan balances by age, see
appendix II, figure 13.
20
Data in this paragraph do not include less than 0.5 percent of borrowers for whom
Education could not determine their age. See appendix II, figures 12 and 13 for more
detailed information.
21
Education’s Direct PLUS Loan program offers parents of dependent undergraduate
students the opportunity to borrow to finance their children’s education. PLUS loans are a
form of Direct Loan that can be used by graduate or professional degree students or
parents of dependent undergraduate students to pay for educational expenses not paid for
by other assistance. Parents or step-parents are eligible for such loans if their child is a
dependent student enrolled at least half-time and the school participates in the Direct
Loan Program. For more information on Parent PLUS loans, see appendix II.
Page 10 GAO-17-45 Social Security Offsets
and Social Security benefits. As shown in figure 2, the share of borrowers
age 65 and older in default and offset in fiscal year 2015 was 37 percent
and 5 percent, respectively. By contrast, the share of borrowers under
age 50 in default and offset was 17 percent and 2 percent, respectively.
Figure 2: Number of Federal Student Loan Borrowers and Share of Those in Default
and Offset for Any Federal Payment by Age, Fiscal Year 2015
Page 11 GAO-17-45 Social Security Offsets
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. From fiscal
years 2002 through 2015, the number of defaulted federal student loan
borrowers of any age with Social Security offsets increased from about
36,000 to 173,000. For those under age 50, the number of borrowers with
Social Security offsets increased from about 15,000 to 59,000 over this
time period—a three-fold increase. For those in the age 50 to 64 and 65
and older groups, the increase was greater—about 407 percent and 540
percent, respectively. In total for fiscal year 2015, about 114,000
borrowers age 50 and older had Social Security disability, retirement, or
survivor benefits offset to repay defaulted federal student loans.
Among those subject to Social Security offsets, most received disability
benefits rather than retirement or survivor benefits. In fiscal year 2015, 69
percent of defaulted borrowers of any age whose Social Security benefits
were offset received disability benefits, including 80 percent of those 50 to
64. Since disability benefits are automatically converted to retirement
benefits once beneficiaries reach their full retirement age, the vast
majority—95 percent—of defaulted borrowers age 65 and older received
retirement or survivor benefits in fiscal year 2015.
22
Of these borrowers,
about 23 percent had previously received disability benefits.
Among borrowers 50 and older at the time of their initial Social Security
offset, about 43 percent had held their student loans for 20 years or more.
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. From 2004 to 2014, the population of older Americans in Social
Security offset became increasingly composed of those with Social
Security income below the median benefit amount.
22
Social Security’s full retirement age is 66 for beneficiaries born between 1943 and 1954.
Growth in Social Security
Offsets and Prevalence of
Disability Benefits
Older Americans
Often Had Held
Student Loan Debt for
Decades Prior to
Offset, and Many Had
the Maximum
Possible Amount
Withheld through
Social Security Offset
Page 12 GAO-17-45 Social Security Offsets
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.
23
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.
24
Figure 3: Length of Time Older Borrowers Had Held Student Loans At Time of Initial
Social Security Benefit Offset, Fiscal Years 2001 to 2015
Note: Percentages in this figure do not add to 100 due to rounding.
These older borrowers generally took out their loans at traditional mid-
career working ages, and relatively few of them took out their loans at a
traditional college-going age. Across all borrowers 50 or older, 61 percent
became subject to offset for loans taken out in their 30s and 40s. For
borrowers 50 to 64 at the time of their initial offset, 8.2 percent had
outstanding loans that were taken out when they were under 25. Among
23
Borrowers may hold loans for an extended period of time for several reasons.
Deferments and forbearances, including in-school deferments, can extend the repayment
period. Extended repayment plans offered on certain loans can last up to 30 years.
Additionally, loans remain open and accrue interest while borrowers are in default. Social
Security offset may begin after a borrower has been in default for many years if, for
instance, the borrower was not receiving Social Security benefits at the time of default.
See appendix II for additional discussion of the length of time borrowers were in default
before becoming subject to Social Security offset.
24
When borrowers held consolidation loans, we counted the underlying loans that were
paid via the consolidation loan in measuring the length of time the borrower held loans.
We excluded all other loans that were paid off or otherwise closed before the borrower
became subject to offset.
Many Older Americans
Had Held their Student
Loans for 20 Years or
More at the Time of Initial
Offset
Page 13 GAO-17-45 Social Security Offsets
borrowers 65 and older, 1.4 percent had outstanding loans that were
taken out when they were under 25.
Older borrowers who became subject to Social Security offsets
predominately defaulted on loans for their own education. Among older
borrowers subject to offset of their Social Security benefits, more than
three-quarters had defaulted on loans they took out for their own
education rather than on loans they took out for a child’s education,
known as Parent PLUS loans.
25
For borrowers 50 to 64 at the time of
initial offset, 82 percent had only ever held loans taken out for their own
education. A greater proportion of borrowers 65 or older had Parent
PLUS loans, but even among this group, about two-thirds of the
borrowers never had Parent PLUS loans.
26
Total federal student loan debt for most older Americans who became
subject to offset was less than $10,000, while a small percentage owed
$50,000 or more. Initial balances tended to be slightly higher among
borrowers 65 and older at the time of their initial offset compared to those
50 to 64.
27
(See fig. 4).
25
Parents are eligible for Direct PLUS loans to pay for educational expenses not paid for
by other assistance if their child is a dependent student enrolled at least half-time and the
school participates in the Direct Loan Program.
26
Among borrowers 50 to 64 at the time of initial offset, 11 percent held only Parent PLUS
loans for a child’s education and 7 percent of borrowers held loans both for their own
education and for a child’s education. For borrowers 65 and older, 21 percent of borrowers
held only Parent PLUS loans, and 12 percent held both types of loans.
27
For example, among borrowers 50 to 64 at the time of initial offset, 7 percent owed more
than $50,000, including 2 percent who owed more than $100,000. For those 65 and older,
11 percent owed more than $50,000, including 4 percent who owed more than $100,000.
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
Page 14 GAO-17-45 Social Security Offsets
Figure 4: Number of Borrowers Over 50 Becoming Subject to Social Security Offset
for the First Time, By Year and Size of Loan Balance
Note: Figures not adjusted for inflation.
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.
28
The offset for the
remaining 56 percent was less than the maximum 15 percent of their
benefit payment. Most of these borrowers had between 10 and 15
percent of their benefit payment offset. A small proportion of borrowers
28
The amount of a monthly benefit offset is calculated as the lesser of 15 percent of the
monthly benefit payment after any deductions (e.g., Medicare Part B premiums), the
amount of the benefit payment over $750, or the outstanding amount of the debt.
Many Older Americans
Subject to Social Security
Offset for Student Loan
Debt Have the Maximum
Amount Withheld
Page 15 GAO-17-45 Social Security Offsets
(about 5 percent of those 50 to 64 and 4 percent of those 65 and older)
were approved for a financial hardship reduction and paid a reduced
amount of offset compared to what they would have otherwise.
The typical monthly Social Security benefit offset for older Americans
across fiscal years 2001 through 2015 was slightly more than $140. The
minimum amount was $25, which is the lowest amount at which Treasury
will initiate an offset. For borrowers 65 or older at their initial offset,
monthly payments ranged up to about $240 (see fig. 5). At the median,
monthly offsets were similar for those 50 to 64 and 65 and older—$142
and $146, respectively.
Figure 5: Distribution of Monthly Social Security Offset Amount for Older Americans, Fiscal Years 2001 to 2015
A growing share of Social Security beneficiaries is potentially subject to
offset because the share of beneficiaries who have benefits below the
protected threshold of $750 has declined. Because of the offset threshold,
those receiving monthly benefits of $750 or less who hold defaulted
federal student loans are not subject to offset. However, unlike Social
Security benefits which are increased on an annual basis through cost of
living adjustments, the Social Security offset threshold of $750 has not
been adjusted. As the relative value of the offset threshold has declined
over time, it applies to a smaller share of Social Security beneficiaries.
Across all Social Security beneficiaries in 2004, about 42 percent of those
receiving Social Security disability benefits and about 33 percent of those
receiving retirement benefits had monthly benefits of less than $750 a
month and thus could not become subject to offset. By 2014, however,
the share of all beneficiaries below the $750 threshold had fallen to 19
Older Americans in Social
Security Offset
Increasingly Have Social
Security Income Below the
Median Benefit Amount
Page 16 GAO-17-45 Social Security Offsets
percent of disability beneficiaries and 16 percent of retirement
beneficiaries.
29
Over time, the population of older Americans in Social Security offset has
become increasingly composed of those with Social Security incomes
below the median benefit amount. In 2004, 21 percent of older Americans
subject to Social Security offset received benefits that would have placed
them in the bottom half of the overall benefits distribution before
considering the amount withheld through offset (see table 2). By 2014,
about 60 percent of older Americans subject to offset received benefits
that, prior to offset, would place them below the median Social Security
benefit amount—about $1,070 for disability beneficiaries and $1,320 for
retirement beneficiaries in 2014.
Table 2: Social Security Benefits of Older Americans Subject to Offset Compared to
Overall Benefit Distribution
Proportion of offset population benefit amounts in
quintiles (Q) of overall Social Security benefit distribution
Year
Q1 (lowest
20 percent)
Q2
Q3
Q4
Q5 (highest
20 percent)
Percent
below
median
benefit
2004
0
5
40
37
18
21
2009
0
30
35
23
12
49
2014
2
41
28
20
9
60
Source: GAO analysis of data from the Departments of Education and the Treasury, and the Social Security Administration. |
GAO-17-45
Note: Disability beneficiaries subject to Social Security offset for defaulted federal student loans are
compared to the overall distribution of disability benefit amounts, and retirement beneficiaries subject
to offset are compared to overall distribution of retirement benefits. Quintile cutoffs were calculated
using published Social Security Administration tables and are approximate. Benefit amounts are prior
to any deductions or offsets.
29
Across all Social Security beneficiaries, the overall distribution of Social Security benefit
amounts tends to increase over time. Cost of living adjustments increase payments to
current beneficiaries. Additionally, newly entitled beneficiaries, on average, have higher
earnings and thus higher initial benefit amounts than those whose benefits began many
years ago.
Page 17 GAO-17-45 Social Security Offsets
A small share of Education’s total collections from the Treasury Offset
Program came from Social Security offsets. Nearly three-quarters of the
collections through Social Security offset were applied to Treasury Offset
Program fees and to interest on the remaining loan balance, rather than
to loan principal. With respect to outcomes for older borrowers, about half
of borrowers remained in offset for 1 year or less while others remained in
offset for multiple years. 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.
Data from Treasury show that Education collected about $171 million in
Social Security offsets in fiscal year 2015, which amounted to a small
share of the agency’s total collections from the Treasury Offset Program
(see fig. 6). In total, Education collected almost $2.3 billion from offsets of
any kind. The $171 million collected from Social Security offsets was
equivalent to about 8 percent of this total. The vast majority of offsets for
Education debt— nearly $2.1 billion, or about 91 percent—were from
federal tax refunds.
30
30
As described earlier, Education’s total collections amounted to about $4.5 billion in fiscal
year 2015. Thus, about half of this amount—nearly $2.3 billion—came from collections
through the Treasury Offset Program, including federal tax refunds and Social Security
offsets.
Social Security
Offsets Were a Small
Share of Education’s
Collections and
Primarily Paid down
Fees and Interest as
Many Borrowers
Remained in Default
after 5 Years
Social Security Offsets
Were a Small Share of
Education’s Collections
through the Treasury
Offset Program, but a
Relatively Larger Share of
These Offsets Went
toward Program Fees
Page 18 GAO-17-45 Social Security Offsets
Figure 6: Total Amount of Offset Collections for Education Debt and Share
Allocated to Treasury Offset Program Fees by Type of Offset, Fiscal Year 2015
Note: These data reflect the amount of net offset collections after any reversals of offsets initially
processed during the fiscal year.
As shown in figure 6, a relatively larger share of the total amount
collected through Social Security offsets went toward Treasury Offset
Program fees. In fiscal year 2015, the fee for each Social Security offset
was $15 compared to $17 for each federal tax refund offset. Because
offset fees are assessed per transaction, a borrower subject to monthly
Social Security offsets could pay up to $180 per year in fees compared to
$17 for a single federal tax refund transaction. According to data from
Treasury, offset fees collected through the Treasury Offset Program
amounted to about 11 percent of Social Security offsets collected for
Education debt compared to 1 percent for federal tax refund offsets.
31
31
Treasury’s data show that overall program fees for collection of federal non-tax debt
owed to Education and other federal agencies through the Treasury Offset Program
amounted to about $167 million in fiscal year 2015. Of this amount, fees for federal tax
refunds and Social Security benefits amounted to about $79 million and $73 million,
respectively. Fiscal Service charges fees to Federal agencies for offset to cover the cost
of the Treasury Offset Program. According to Fiscal Service, the fee for Social Security
offsets, decreased from $17 per offset in fiscal year 2013 to $15 per offset in fiscal year
2014 due to projected increases in the volume of offsets and funding requirements that
were relatively constant.
Page 19 GAO-17-45 Social Security Offsets
Collections on defaulted student loans through Social Security offset were
applied primarily to borrowers’ fees—including Treasury Offset Program
fees, as well as other fees charged to defaulted borrowers by
Education—and interest. Treasury’s Bureau of the Fiscal Service retains
the Treasury Offset Program fee and sends the remainder of the offset to
Education.
32
Education officials said that for each student loan, it applies
the offset first to any outstanding fee balance,
33
then to accrued interest,
and then to principal.
34
Of the approximately $1.1 billion collected through
Social Security offsets from fiscal years 2001 through 2015 from
borrowers of all ages, about 71 percent was applied to fees and interest—
12 percent to fees and 59 percent to interest—compared to 28 percent
that was applied to principal.
Among borrowers 50 or older at the time of initial offset, 53 percent had
no portion of their offset payments applied to principal. This figure was
even higher among older borrowers whose monthly benefit was below the
poverty guideline prior to offset—68 percent of these borrowers had the
full amount of their offset payments applied to fees and interest only.
35
In
contrast, 23 percent of borrowers 50 and older had the majority of their
offset payments applied to principal.
36
These borrowers came
disproportionately from those whose monthly benefit was above the
poverty guideline even after offset.
32
As described earlier, Treasury assesses offset fees to Education, and Education, in turn,
passes the fees on to borrowers.
33
These fees are distinct from the fee Treasury charges for the Treasury Offset Program.
Certain fees, including late payment fees and collections costs, may be charged to
defaulted borrowers. 34 C.F.R. §§ 682.202(e)-(f) and 685.202(d)-(e). Such fees constitute
less than 0.01 percent of the aggregate loan balance of older Americans at the time of
initial offset.
34
According to Education officials, when a borrower has multiple loans eligible for offset,
Education applies the amount offset to each loan in proportion to that loan’s share of the
total balance eligible for offset.
35
These calculations are based on the Department of Health and Human Services Federal
Poverty Guideline for a single individual, available at: https://aspe.hhs.gov/prior-hhs-
poverty-guidelines-and-federal-register-references.
36
Among borrowers who were under 50 at the time of their initial offset, 47 percent did not
have any portion applied to principal, while 27 percent had more than half of their offsets
applied to principal. For those under 50 with benefits below the poverty guideline prior to
offset, 56 percent did not have any portion of their offset applied to principal.
More Than 70 Percent of
the Amount Collected
through Social Security
Offset Was Applied to
Borrowers’ Fees and
Interest
Page 20 GAO-17-45 Social Security Offsets
About half of older Americans who had Social Security offsets to repay
student loan debt were no longer subject to offset within a year, while
slightly more than one-third remained subject to offset for 2 years or
more.
37
Looking across the approximately 126,000 borrowers 50 and
older whose initial Social Security offset was in fiscal years 2001 through
2010, 45 percent were subject to offset for a year or less, including 8
percent who were only subject to offset for a single Social Security
payment.
38
In contrast, 37 percent had their Social Security benefits
reduced for multiple years. Specifically, about 25 percent were in offset
for 2 to 5 years and 12 percent were in offset for 5 years or more. Results
were similar between borrowers 50 to 64 and borrowers 65 and older
(see fig. 7).
37
This section focuses on the longest continuous period of time borrowers were subject to
offset. Borrowers can be subject to offset for multiple periods of time. For example,
borrowers who rehabilitate their defaulted loans would no longer be subject to offset but
could later become subject to offset again if they defaulted a second time.
38
We restricted this analysis to borrowers who entered offset prior to fiscal year 2011 so
that we could track borrowers for 5 years after their initial offset. Across fiscal years 2001
through 2015, there were about 285,000 older borrowers who became subject to offset.
About Half of Older
Americans with Defaulted
Student Loans Remain
Subject to Social Security
Offsets for 1 Year or Less,
but Those with Larger
Balances Tend to Remain
Longer
Page 21 GAO-17-45 Social Security Offsets
Figure 7: Length of Time Older Borrowers Were Subject to Offset of Their Social
Security Benefits for Defaulted Student Loan Debt, by Borrower Age (2001 through
2010)
Older borrowers who were subject to offset for shorter periods tended to
owe less than those who remained subject to offset for longer periods of
time. Specifically:
• Less than 1 year: These borrowers had a median loan balance of
about $6,000 and an average balance of $12,150 at the time of initial
offset.
39
39
Because some borrowers have large student loan balances, the average amount of
student loan debt per borrower for any group of borrowers tends to be higher than the
median amount of debt for that group. This analysis includes borrowers whose initial offset
occurred in fiscal years 2006 through 2010 because loan balance histories prior to 2006
were not consistently available from Education.
Page 22 GAO-17-45 Social Security Offsets
• 2 to less than 5 years: These borrowers had a median balance of
$8,000 and an average balance of $15,250.
• 5 or more years: These borrowers had a median balance of $12,800
and an average balance $22,450.
Many older borrowers had paid off or discharged their debt 5 years after
their initial Social Security offset, but others remained in default and
offset.
40
Among those 50 and older at the time of their initial offset, about
32 percent had paid off or discharged their debt due to disability or school
closure or otherwise closed their loans after 5 years for reasons other
than death.
41
An additional 13 percent died while their loans were
outstanding (see fig. 8). The remainder—about 55 percent—had loans
that were still open 5 years after their initial offset. Most of these
borrowers with open loans were in default, but others had emerged from
default by rehabilitating or consolidating their loans. Specifically, about 36
percent of those 50 and older at the time of their initial offset were in
default after 5 years, including 20 percent who were still in offset.
42
A
small share—about 10 percent—was able to rehabilitate or consolidate
their loans and was in repayment.
40
Using data encompassing fiscal years 2001 through 2015, we examined outcomes for
borrowers 5 years after the date of their initial offset. For some borrowers, the 5-year
period included the recession from 2007- 2009, which may have impacted some
borrowers’ economic situation, including their employment prospects. For more
information about the economic impacts for older Americans from the 2007-2009
recession, see GAO, Income Security: Older Adults and the 2007-2009 Recession,
GAO-12-76 (Washington, D.C.: Oct. 17, 2011).
41
In certain circumstances, borrowers may be able to discharge their debt for reasons
other than disability or death, including if their school closes while they are enrolled or
soon after they withdrew or if their school falsely certified their eligibility to receive the
loan.
42
Some borrowers who were in offset 5 years later may not have been continuously in
offset.
Almost One-Third of Older
Americans in Social
Security Offset Paid Off or
Discharged their Student
Loans, but About 36
Percent Were Still in
Default after 5 Years
Page 23 GAO-17-45 Social Security Offsets
Figure 8: Share of Older Borrowers by Outcome 5 Years after Initial Social Security Offset to Repay Defaulted Student Loan
Debt, Fiscal Years 2001 to 2010
Notes: Data on 5 year outcomes include borrowers who became subject to offset prior to fiscal year
2011 in order to observe borrowers for a full 5 year time period through fiscal year 2015. Loan
balance data were only available from fiscal year 2006 onward.
a
Borrowers who are totally and permanently disabled may be eligible to discharge their debt through a
Total and Permanent Disability (TPD) discharge subject to several requirements, including a 3-year
monitoring period.
Page 24 GAO-17-45 Social Security Offsets
b
In certain circumstances, borrowers may be able to discharge their debt for reasons other than
disability or death, including if their school closes while they are enrolled or soon after they withdrew
or if their school falsely certified their eligibility to receive the loan.
c
Rehabilitation is a process by which borrowers can remove a loan from default by making a minimum
number of requirement payments. Consolidation allows borrowers to combine multiple loans into one
loan.
d
Under certain circumstances, borrowers who are not in default may also receive a forbearance or
deferment that allows them to temporarily postpone or reduce their student loan payments.
e
Education has also established a process to allow defaulted borrowers who are subject to offset to
apply for a financial hardship exemption or reduction in offset.
As shown in figure 8, older borrowers who had been in offset but then
paid off their loans had substantially smaller outstanding loan balances at
the time of their initial offset compared to other older borrowers subject to
offset. For example, the median outstanding balance for older borrowers
who were in offset but paid off their loans within 5 years was $2,379
compared to a median outstanding balance of $11,838 for borrowers who
were still in offset.
43
Among the 55 percent of older Americans who still had student loans
open 5 years after their initial Social Security offset, most had made some
progress toward paying down their loan balances, but the loan balances
of others increased over time. Taking into account Social Security offsets
as well as any other source of payment on a borrower’s loans, such as
tax refund offsets or voluntary payments, the majority (60 percent) of
these borrowers had decreased their loan balances. The loan balances of
the remaining 40 percent grew because the payments on their loans from
all sources did not keep up with accruing interest.
44
Borrowers who remained in Social Security offset after 5 years tended to
have made more progress in paying down their loan balances compared
to other borrowers who still had open loans but were no longer in offset.
For example, some borrowers may no longer have been in offset because
43
Additional information on outcomes of older Americans with Social Security offsets can
be found in appendix III, tables 15 and 16, including outcomes by age and duration in
offset. Outcomes for those in the age 50 to 64 and age 65 and older categories were
similar overall. Older borrowers who had a shorter duration of time spent in offset
generally had more favorable outcomes than those who remained in offset for longer
periods of time.
44
A somewhat greater proportion of borrowers younger than 50 who had open loans after
5 years had their loans increase over time; 47 percent of these borrowers owed more at
the end of 5 years than they did when their first offset occurred.
Some Older Americans in
Offset Have their Student
Loan Debt Increase over
Time
Page 25 GAO-17-45 Social Security Offsets
they rehabilitated or consolidated their loans, but were then in
forbearance or deferment and, thus, were not making payments.
Specifically:
• Borrowers who remained in offset: Among borrowers 50 and older
who still had offsets after 5 years, 32 percent had their loan balances
increase after considering all sources of payment on their loans.
• Borrowers with a financial hardship exemption from offset: 48
percent of borrowers 50 and older who still had open loans but had
secured a hardship exemption—and thus were no longer making
payments through Social Security offset—had a greater loan balance
after 5 years.
• Borrowers in forbearance or deferment: Borrowers 50 and older
who exited offset by rehabilitating or consolidating their loans but were
in forbearance or deferment at the end of 5 years—and thus not
making payments—fared particularly poorly, as 67 percent owed more
than they did when they entered offset.
More borrowers who were in Social Security offset for several years paid
down principal with their offsets than borrowers who were briefly in offset,
but some borrowers had not paid any principal after years of offsets.
Among borrowers age 50 or older who stayed in offset for less than 1
year, 60 percent paid only fees and interest. For those in offset for more
than 5 years, about one-third paid only fees and interest with their offsets,
while about two-thirds paid some principal.
45
45
Because many borrowers have accrued outstanding interest balances when they enter
offset, a borrower whose Social Security offsets do not decrease the loan principal can still
decrease their overall loan balance by paying down the outstanding interest, as long as
the amount of the Social Security offset applied to outstanding interest is greater than the
monthly interest accruing on the loan.
Page 26 GAO-17-45 Social Security Offsets
A growing number of older borrowers may experience financial hardship
in the years leading up to or during retirement because the Social
Security offset threshold has not been adjusted for increases in costs of
living since program provisions were implemented by regulation in 1998.
In addition, many older Americans subject to offset may be eligible for a
TPD discharge but they have not applied for one, and Education is taking
steps to reduce the numbers of borrowers who have not applied.
Education is also taking steps to automatically suspend offsets for certain
disabled borrowers, but these steps could adversely affect borrowers at
an older age. This is because Education does not provide these
borrowers with information that would help them make more informed
choices about applying for a TPD discharge. Further, for those who apply
for a TPD discharge, key requirements of the 3-year monitoring period
are not clearly communicated. As a result, older borrowers and others
with disabilities may not complete required documentation to continue
receiving this relief. Finally, Education established a process for granting
financial hardship exemptions or reductions from offset, but they do not
provide borrowers information about this option unless requested or
review these exemptions once granted.
Older borrowers who remain in offset may increasingly experience
financial hardship. 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. The threshold for Social Security offsets was established
to prevent undue financial hardship on borrowers who rely on benefits for
a substantial part of their income and who may be unable, rather than
unwilling, to repay debts.
46
This is consistent with the policy underlying
the Social Security program that benefits are intended to help ensure
older Americans have adequate retirement incomes and do not have to
depend on welfare.
47
According to SSA, Social Security benefits
represented 90 percent or more of total income for about one-third of
beneficiaries 65 and older in 2014.
48
At the time it was set, in 1998, the
46
See H.R. Rep. No. 104-537, at 565-67 (1996) (Conf. Rep.).
47
Once payments have begun, Social Security benefits are generally adjusted annually to
reflect increases in the cost of living. For more information on the Social Security program,
see GAO, Social Security’s Future: Answers to Key Questions, GAO-16-75SP
(Washington, D.C.: Oct. 27, 2015).
48
Social Security Administration, 2016.
Program Design May
Impact Retirement
Security for Older
Borrowers, Including
Those Seeking Relief
Permitted for
Permanent Disability
or Financial Hardship
A Growing Number of
Older Borrowers with
Social Security Offsets
May Experience Financial
Hardship because the
Offset Threshold Is Not
Adjusted for Increases in
Costs of Living
Page 27 GAO-17-45 Social Security Offsets
threshold for Social Security offsets was above the poverty guideline—
$750 a month represented about 112 percent of the poverty guideline for
a single adult that year.
49
However, in the absence of cost of living
adjustments, the relative value of the offset threshold has declined over
time to well below the poverty guideline. In 2016, the poverty guideline for
a single adult equated to a monthly income of about $990, and the $750
threshold represented about 76 percent of this amount.
50
Consequently,
an increasing number of older Americans subject to Social Security
offsets received benefits below the federal poverty guideline. In fiscal year
2004, about 8,300 borrowers in the 50 and older age category had
benefits below the poverty guideline compared to almost 67,300 in fiscal
year 2015 (see fig. 9). As a share of borrowers in the 50 and older age
category, this growth was equivalent to an increase from 38 percent in
fiscal year 2004 to 64 percent in fiscal year 2015.
51
In addition, as shown
in figure 9, a growing number of these older borrowers already received
Social Security benefits below the poverty guideline before offsets further
reduced their income.
49
This figure is based on the Department of Health and Human Services Federal Poverty
Guideline in 1998 for a single individual in the 48 contiguous states and the District of
Columbia, available at: https://aspe.hhs.gov/prior-hhs-poverty-guidelines-and-federal-
register-references.
50
This poverty guideline applies to a single individual in the 48 contiguous states and the
District of Columbia.
51
Likewise, a growing number of younger borrowers subject to Social Security offset have
benefits below the poverty guideline. In fiscal year 2004, 7,600 borrowers under 50 who
had Social Security offsets received benefits—primarily for disability—below the poverty
guideline, equivalent to 47 percent of this group. By fiscal year 2015, this number had
risen to nearly 51,500 borrowers, equivalent to 76 percent of this group.
Page 28 GAO-17-45 Social Security Offsets
Figure 9: Number of Borrowers Age 50 and Older Whose Social Security Benefits Are below the Poverty Threshold after
Offset for Education Debt, Fiscal Years 2004 to 2015
Note: Borrowers’ Social Security benefit and offset amounts for each month in a fiscal year were
compared to the monthly equivalent of the Department of Health and Human Services Federal
Poverty Guideline for a single individual in the 48 contiguous states and the District of Columbia in the
relevant calendar year. Borrowers who received Social Security benefits below the poverty guideline
for the majority of months they were subject to offset in a fiscal year were categorized as being below
the poverty guideline.
Proposals to adjust Social Security offset provisions—such as by indexing
the offset threshold—have been made by Education and proposed in
legislation. In October 2015, Education proposed that the Social Security
offset threshold be indexed to inflation.
52
In its support for this proposal,
Education noted that the Debt Collection Improvement Act of 1996
recognizes that Social Security is “a key source of income for many
52
U.S. Department of Education, “Strengthening the Student Loan System to Better
Protect All Borrowers,” Oct. 1, 2015.
Page 29 GAO-17-45 Social Security Offsets
disabled and elderly Americans.” In addition to Education’s proposal,
legislation was introduced in October 2015 to index the Social Security
offset threshold to inflation.
53
It is also important to recognize that adjusting Social Security offset
provisions would reduce Education’s recoveries from Social Security
offsets. If the offset limit had been indexed to match the rate of increase
in the poverty guideline, 62 percent of all older borrowers whose Social
Security benefits were offset for federal student loan debt in fiscal year
2015 would have kept their entire benefit and 13 percent would have had
a smaller offset.
54
In total, our analysis found that Education would have
collected about 40 percent of the amount collected through Social
Security offsets for borrowers of any age in fiscal year 2015.
Older Americans subject to Social Security offset may be eligible to have
their student loan debt discharged because they are severely disabled.
55
According to our analysis of linked data from Education, Treasury, and
SSA, the large majority of older borrowers in offset who had their student
loans discharged did so through Education’s total and permanent
disability (TPD) discharge process. For those 50 and older who were
initially subject to offset between fiscal years 2001-2010, TPD discharges
represented about 90 percent of all non-death related discharges within 5
53
Social Security Garnishment Modernization Act of 2015, H.R. 3747, 114th Cong. § 2.
Other legislation has been introduced to exempt these benefits from offset. For example,
one bill proposed to exempt Social Security benefits from offset only in the case of federal
student loan debt. Stop Social Security Garnishment for Student Debt Act of 2015, H.R.
3967, 114th Cong. § 2. Another bill proposed a comparable exemption in the case of any
federal debt. Protection of Social Security Benefits Restoration Act, S. 2387, 114th Cong.
§ 2 (2015). Additionally, in 2015, Treasury modified a similar but separate IRS program
that reduces Social Security benefits and other federal payments to collect on delinquent
federal tax debt—the Federal Payment Levy Program—in order to exempt Social Security
disability benefits from levy. One existing regulatory provision for Social Security offset
generally that could be adjusted to decrease the amount of Social Security benefits
subject to offset is the 15 percent cap on Social Security offsets. However, Fiscal Service
indicated that it does not have the authority to adjust the 15 percent cap on Social Security
offsets for only student loans without a statutory change.
54
For this analysis, we calculated what the offset threshold would have been in fiscal year
2015 if it had remained at 112% of the poverty guideline as it was in 1998. Similarly, 74
percent of borrowers under 50 whose Social Security benefits were offset in fiscal year
2015 would have kept their entire benefit, and 13 percent would have had a smaller offset.
55
Education’s process for such a discharge applies to older borrowers as well as
borrowers under age 50.
Many Older Borrowers
Subject to Offset May Be
Eligible for a Total and
Permanent Disability
Discharge under
Education’s Process but
Have Not Applied
Page 30 GAO-17-45 Social Security Offsets
years after the initial offset. In total, after 5 years, about 8 percent of those
50 and older at the time of their initial offset applied for and successfully
obtained a TPD discharge of their loans, while about 6 percent more were
initially approved, but were still in the conditional 3-year monitoring
period.
56
Education’s TPD discharge process permits such discharges for certain
recipients of Social Security disability benefits of any age. Effective July 1,
2013, the eligibility criteria for TPD discharges were modified to include
borrowers receiving Social Security disability benefits if SSA has
determined they have a disability in which medical improvement is not
expected.
57
Borrowers who receive disability benefits but are not in this
status, as well as other borrowers who do not receive disability benefits,
may still apply for a TPD discharge based on a physician’s certification or
a determination from the Department of Veterans Affairs. Under
Education’s TPD process, when borrowers alert their loan servicer that
they are disabled they are referred to Education’s centralized TPD
servicer who provides them application materials. According to Education
officials, effective from April 2016, offsets are suspended on the
borrower’s loans during the 120-day application period. Once borrowers
submit their completed application, Education determines if they are
56
As described earlier, during the 3-year period while discharge of an individual’s loan is
under consideration, Education is primarily monitoring individuals’ annual income and
continuing disability status. Loans may be reinstated during this period for several
reasons, including if the borrower’s earnings from employment exceeds the poverty
guideline amount for a family of two in their state, if the borrower receives a new federal
student loan, or if SSA determines that the borrower is no longer disabled or that medical
improvement is possible or likely for the borrower’s disability.
57
In addition, borrowers can qualify for a TPD discharge based on physician certification
or documentation from the Department of Veterans Affairs showing that the borrower is
unemployable due to a service-connected disability.
Page 31 GAO-17-45 Social Security Offsets
eligible for a discharge. As described earlier, borrowers approved for a
TPD discharge are generally subject to a 3-year monitoring period during
which the discharged loans may be reinstated for several reasons,
including that the borrower earned income over a specified threshold.
Once the 3-year monitoring period has been completed and the discharge
processed, the loans cannot be reinstated. The value of the discharged
loans is generally treated as taxable income at the close of the 3-year
monitoring period, as described in the sidebar.
58
While TPD discharges represent the largest share of loan discharges for
older Americans in offset, data from Education indicate that a
considerable number of borrowers of any age, including those age 50 and
older, who are eligible for a TPD discharge have not fully completed the
application process.
59
Education has taken steps to identify and conduct
outreach to such borrowers of all ages, many of whom are certified for
offset. Specifically, in December 2015 Education began matching NSLDS
data with SSA records to identify borrowers who receive disability benefits
and who are eligible for a TPD discharge because SSA had determined
that their medical improvement was not expected. Once identified,
borrowers were sent a letter explaining they are eligible for a TPD
discharge and describing the actions they must take to apply. Based on
this data matching, Education reported in April 2016 that it had initially
identified approximately 387,000 borrowers of any age eligible for a TPD
discharge. Of these, over 100,000 borrowers were in default and had
been certified for offset.
60
According to Education, as of July 31, 2016,
TPD discharge applications were sent to about 234,000 borrowers based
on the data matching and slightly more than 19,000 applications had
been submitted and approved.
61
Education officials said that nearly 1,800
additional applications had been submitted but not yet approved,
generally because the agency was in the process of following up to obtain
58
According to Education officials, in some circumstances borrowers may not pay federal
income tax on the value of the discharged loan, for instance when discharged loans
exceed their assets.
59
These data from Education were not available by age and include both older and
younger borrowers.
60
Borrowers who are certified for offset because of their defaulted federal student loans
may not have their Social Security benefits reduced for multiple reasons, including that
their benefits are below the Social Security offset threshold or they have received a
financial hardship exemption.
61
In addition, about 12,500 letters were sent to borrowers but returned because the
borrower is no longer at that address.
Tax Treatment of Federal Student
Loans Discharged Due to Total and
Permanent Disability
The total value of loans discharged
through the Total and Permanent
Disability (TPD) discharge process is
generally treated as income subject to
federal tax. In some cases, this may
result in a considerable amount of tax
liability for disabled borrowers. According
to data from Education, the median
amount of debt per borrower discharged
due to TPD in fiscal year 2015 was about
$17,500. The President’s 2017 Budget
proposal includes a provision to exclude
TPD discharges and other loan
forgiveness programs from taxable
income, but Congress would need to pass
legislation to implement this change.
Education officials said that they alert
borrowers about the tax treatment of TPD
discharges, but do not provide advice.
Instead, the application form in use at the
time of our review directed borrowers to
consult with a tax professional to
determine how the TPD discharge may
affect their personal taxes. The revised
form, which has not yet been
implemented, directs borrowers to contact
the Internal Revenue Service for more
information about tax consequences.
Source: GAO analysis of data and documentation from
the Department of Education and Budget of the United
States Government, Fiscal Year 2017 and Department
of Education, Student Loans Overview Fiscal Year 2017
Budget Proposal.| GAO-17-45
Page 32 GAO-17-45 Social Security Offsets
missing signatures on these applications. Approximately 213,000
borrowers who were sent forms had not yet applied. Education officials
said that the agency will do additional follow up to increase the number of
applications submitted and subsequently approved. According to
Education officials, as of October 2016, an additional approximately 7,000
borrowers were identified as being eligible for a TPD discharge through
the quarterly data match and were certified for offset.
As part of their data-matching effort described above, Education officials
said they are immediately suspending offsets for borrowers of any age
identified as receiving Social Security disability benefits for a condition in
which medical improvement is not expected. According to Education
officials, the agency decided in April 2016 to suspend offsets of any
federal payments through the Treasury Offset Program for borrowers
identified as eligible for a TPD discharge through the data-matching effort,
regardless of whether or not the borrower returns the application form.
62
The suspension from offset for those eligible but not approved for a TPD
discharge continues for as long as Education identifies through its
quarterly data match that the borrower has a disability in which medical
improvement is not expected. During the time that offsets are suspended
a borrower’s loan continues to be in defaulted status, and Education
officials said that interest would continue to accrue on a borrower’s loan
balance. Education officials also said that once disabled borrowers are
converted to Social Security retirement benefits at their full retirement
age—currently age 66 for people born in 1943-1954—offsets would
resume unless the borrower applied and was approved for a TPD
discharge or a financial hardship exemption.
63
Using the linked NSLDS,
Treasury Offset Program, and SSA data, we identified about 32,000
borrowers who were 50 and older at the time of their initial offset and who
62
Education officials cited their authority under 31 C.F.R. § 285.5(d)(12), which states that
a creditor agency can certify to Treasury’s Fiscal Service that the offset amount allowed
by law would result in financial hardship and that a lesser offset amount is reasonable and
appropriate based on the debtor’s financial circumstances.
63
Under Social Security’s program rules, when individuals receiving Social Security
disability benefits reach Social Security’s full retirement age their benefits convert from
disability to retirement.
New Efforts Education Is
Taking to Automatically
Suspend Offsets for
Certain Disabled
Borrowers May Adversely
Affect Borrowers at Older
Ages
Page 33 GAO-17-45 Social Security Offsets
had a disability in which medical improvement is not expected, but who
had not applied for a TPD discharge.
64
Although Education is now automatically suspending offset payments for
borrowers who are TPD discharge-eligible, it has not taken steps to
inform borrowers about key information. For example, Education has not
informed borrowers that they are suspended from offset even if they do
not apply for the TPD discharge. Further, Education has not provided
information to borrowers about the potential consequences from
continuing to accrue interest without applying for the TPD discharge, or
that their offsets may later resume if their benefits are converted.
Education’s Federal Student Aid division’s strategic goals include
providing superior service and information to borrowers to support
customers’ decision-making. In addition, Standards for Internal Control in
the Federal Government state that the agency should externally
communicate the necessary quality information to achieve the entity’s
objectives, which in this case is to provide offset relief to borrowers
eligible to receive it.
65
Education officials said that the agency does not
have written guidance on the suspension process and conducts the
suspension by using the data match to directly inactivate offsets for
borrowers in Fiscal Services’ system. Without any communication from
Education, some borrowers who previously had Social Security offsets
suspended while receiving Social Security disability benefits could be
surprised by a reduction in their monthly Social Security benefits as their
offsets resume once they begin receiving retirement benefits. Providing
information to borrowers on the potential for offsets to resume once they
begin receiving retirement benefits—and that interest on their loan will
have continued to accrue in the interim—will allow borrowers to make a
more informed choice about whether to apply for the TPD discharge.
64
These borrowers had disability benefits that were offset after the revised TPD
regulations went into effect on July 1, 2013 through the end of fiscal year 2015.
65
GAO, Standards for Internal Control in the Federal Government, GAO-14-704G
(Washington, D.C.: Sept. 10, 2014).
Page 34 GAO-17-45 Social Security Offsets
Unclear requirements for Education’s TPD discharge program may affect
even those older borrowers in offset who do apply for relief, particularly
for completing the 3-year monitoring period. Further, the effects of
Education’s program design for TPD discharge are not limited to older
borrowers but also impact disabled borrowers of any age who apply for
the discharge. Using summary data from Education for all borrowers who
applied for TPD discharge, we identified that almost 110,000 individuals
were approved for TPD discharge in fiscal year 2014, while an additional
almost 103,000 were approved in fiscal year 2015.
66
The total loan
balances discharged in those years were over $2.7 billion and nearly $2.6
billion, respectively.
67
Education’s data show that a large number of those
approved for a TPD discharge had their loans reinstated during the 3-year
monitoring period. According to summary data provided by Education’s
TPD servicer, in fiscal year 2015, 61,536 borrowers initially approved for
a TPD discharge had loans reinstated during the 3-year monitoring period
with a total value of about $1.2 billion.
68
Further, our analysis of NSLDS
data showed that about 20 percent of borrowers 50 and older at the time
of their initial offset, and who were in the 3-year monitoring period from
July 1, 2008 through the end of fiscal year 2012, later had their loans
reinstated.
69
66
As described earlier, in addition to a borrower’s Social Security disability status,
borrowers can qualify for a TPD discharge based on physician certification or
documentation from the Department of Veterans Affairs showing that the borrower is
unemployable due to a service-connected disability. Borrowers approved for a TPD
discharge through a Veterans Administration application are not subject to the 3-year
monitoring period and annual income verification requirement and their loans are not
transferred to Education’s TPD servicer.
67
Data on TPD discharge loan balances from Veterans Administration applications was
not available.
68
In the same fiscal year, Education’s data show that 102,652 TPD discharges were
approved. Of this amount, 93,931 were subject to the 3-year monitoring period. Some of
the borrowers who were reinstated in fiscal year 2015 were initially approved and entered
the 3-year monitoring period prior to 2015. Cohort level data to track outcomes for the
TPD discharge population over the 3-year monitoring period were not available.
69
On July 1, 2008, regulations became effective that made the income monitoring period
prospective from the date of the TPD discharge approval.
Key Requirements of the
TPD Discharge Process
are Unclear, and Many
Eligible Older Borrowers
who Are Initially Approved
Have Their Loans
Reinstated
Page 35 GAO-17-45 Social Security Offsets
As shown in figure 10, the vast majority of borrowers of any age whose
loans were reinstated—98 percent in fiscal year 2015—had this occur
because they did not submit the annual income verification form.
70
Figure 10: Number of Reinstatements of Total and Permanent Disability Discharges
(TPD) during 3-year Monitoring Period for Borrowers of All Ages by Reason, Fiscal
Years 2014 and 2015
Note: A borrower’s loan may be reinstated for several reasons during the 3-year monitoring period.
For example, a loan or disbursement violation includes cases where a borrower’s loan is reinstated if
they receive a new Direct Loan, Perkins Loan, or TEACH Grant. Borrower requested recall refers to
cases where a borrower voluntarily requests the TPD servicer to reinstate their loan (e.g., due to tax
consequences or other circumstances).
We found that the high number of loans reinstated because the borrower
did not provide the annual income verification form results from unclear
annual reporting requirements. 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. Federal
agencies are directed to use language that is clear, concise, and well-
70
Education’s data included all borrowers who were approved for a TPD discharge and
were in the 3-year monitoring period regardless of age or offset status.
Page 36 GAO-17-45 Social Security Offsets
organized that the public can understand in documents that explain how
to comply with requirements the federal government administers or
enforces.
71
Moreover, Standards for Internal Control in the Federal
Government state that the agency should externally communicate the
necessary quality information to achieve the entity’s objective.
72
However,
we found that the forms the TPD servicer provides to borrowers may not
clearly communicate all requirements to avoid loan reinstatement. In
particular, the TPD discharge approval form sent to borrowers states that
violating certain requirements will result in loan reinstatement, such as
earning income from employment above the poverty guideline amount for
a family of two in their state. However, the additional annual reporting
requirement may be unclear because the form does not explicitly state
that the loan will be reinstated if the borrower does not return the annual
income verification form—even if they have no earnings—to document
that their earnings from employment are below the poverty guideline for a
family of two in their state. In addition, we found that the annual income
verification form sent by Education’s TPD servicer each year during the 3-
year monitoring period does not state that failure to submit the form will
result in loan reinstatement (see app. IV for a copy of documentation
provided by Education’s TPD servicer). According to Education, if a
borrower does not return the income verification form, the TPD servicer
resends the form two additional times, but the follow up attempts do not
include any additional language to alert the borrower that failure to return
the form will result in loan reinstatement. For borrowers who fail to return
the annual income verification form, their loans are reinstated and offsets
may resume. The number of reinstatements may continue to grow as
more borrowers are initially approved through Education’s recent data
matching and outreach efforts unless unclear annual reporting
requirements are addressed.
Borrowers whose loans are reinstated have 1 year to appeal to have their
case re-evaluated, but most do not. The notice sent to borrowers
informing them of the loan reinstatement provides the reason for the
reinstatement and information on how to appeal. The borrower may
appeal by mail or online through Education’s TPD servicer’s website.
73
However, most borrowers who have their loans reinstated do not
71
Plain Writing Act of 2010, Pub. L. No. 111-274, 124 Stat. 2861, 2861-62.
72
GAO-14-704G.
73
www.disabilitydischarge.com.
Page 37 GAO-17-45 Social Security Offsets
successfully appeal. According to Education’s data for borrowers of any
age in the 3-year monitoring period, 20,368 reinstatement appeals were
approved in fiscal year 2015, but 62,303 loans were reinstated during the
prior fiscal year.
74
Borrowers who do not appeal their loan reinstatement
may have offsets resume.
In addition, even with improvements to clarify forms sent to borrowers, it
may be difficult for disabled borrowers to comply with documentation
requirements. Although Education officials recognize that the population
of borrowers approved for a TPD discharge may have difficulty in
providing documentation due to the severity of their disabilities, borrowers
must take action to manually submit the income verification form each
year during the 3-year monitoring period.
75
In contrast to manual
activities, Standards for Internal Control in the Federal Government state
that automated control activities tend to be more reliable because they
are less susceptible to human error and are typically more efficient.
76
While Federal Student Aid’s responsibilities include improving operational
efficiency and the quality of service for customers across the entire
student aid life cycle, the agency has not taken steps to reduce burdens
for disabled borrowers in providing the income verification form. In
contrast for another process that involves income verification, Education
has taken steps to improve operational efficiency and the quality of
customer service by reducing burdens on borrowers through a tool that
automatically identifies income information. Specifically, the application
process for income-driven repayment plans includes a feature—the IRS
Data Retrieval Tool—to transfer income information from a borrower’s
federal tax return.
77
According to Education, this tool has helped simplify
and streamline the process for borrowers while improving both speed and
74
Summary data provided by Education did not identify borrowers who appealed but were
denied.
75
Education’s Federal Student Aid Ombudsman also previously reported that, in some
cases they examined, borrowers suffered from mental illness or brain injuries and records
indicated they had difficulty navigating the TPD discharge process. See: Department of
Education’s Federal Student Aid Ombudsman, Fiscal Year 2008 First Quarter Report.
76
GAO-14-704G.
77
Income-driven repayment plans are repayment plans offered by Education that base
monthly payments on income and family size for borrowers who meet certain eligibility
requirements. For more information on these plans, see GAO, Federal Student Loans:
Education Could Do More to Help Ensure Borrowers Are Aware of Repayment and
Forgiveness Options, GAO-15-663 (Washington, D.C.: Aug. 25, 2015).
Page 38 GAO-17-45 Social Security Offsets
accuracy.
78
Because Education has not included such a method to
automate annual income verification and streamline the annual income
verification process for the TPD discharge, Education has not made it
easy for some borrowers to comply with the requirements of the 3-year
monitoring period and avoid having their loans reinstated and offsets
resume.
79
Education’s annual income verification process may also result in under-
reporting of earnings from some borrowers. For example, Education does
not independently verify earnings for borrowers who submit the form and
report they have no earnings. The borrower is required to sign and return
the form certifying they had no earned income during the specified time
period and is notified that there can be a penalty for making false
statements or misrepresentations. However, Education officials said that
they do not take action to verify this reported information. Borrowers who
do report earnings are required to provide supporting documentation,
such as their W-2. Education’s current verification process also does not
address instances in which a borrower with income from multiple
employers only includes income and supporting documentation from
some, but not all, of them. This could result in borrowers receiving a TPD
discharge when their loan should have been reinstated. Automating
verification could also improve Education’s internal controls by addressing
situations where people may fail to report some or all income.
78
U.S. Department of Education, Strengthening the Student Loan System to Better Protect
All Borrowers.
79
Certain borrowers in the 3-year monitoring period might automatically meet the TPD
income requirements based on their Social Security status. Specifically, for those
receiving Social Security disability benefits who are not blind or in a trial work period,
Social Security’s Substantial Gainful Activity test determines whether individuals’ have
earnings from employment below a level that is less than the level used for the
Education’s 3-year monitoring period.
Page 39 GAO-17-45 Social Security Offsets
Aside from a loan discharge for disability, older borrowers who are
subject to offset may obtain relief by requesting a financial hardship
exemption or reduction through a process established by Education,
subject to certain requirements.
80
This relief option is also available to
borrowers under age 50. Borrowers who initiate contact with Education
and state that they are experiencing a financial hardship due to Social
Security offset are sent an application package to document their income
and expenses. Borrowers with Social Security benefits below the poverty
guideline as well as borrowers with higher benefits may apply. As shown
in figure 11, Education determines eligibility based on a comparison of an
individual’s documented income and qualified expenses, rather than a
specific income threshold. Education officials said they immediately
suspend or reduce Social Security offsets for borrowers making a first-
time request while their application is processed. However, for borrowers
who have previously applied but had offsets restarted, offsets continue
during the subsequent application submission and review process.
Once a borrower submits the required documentation on income and
qualified expenses—such as housing, utilities, health care, and
transportation—Education then compares a borrower’s income and
expenses and generally uses IRS collection standards to determine
eligibility.
81
If the application is approved, the borrower will either be
exempted from offset or have a reduced offset. These borrowers’ loans
are still considered to be in defaulted status, and interest continues to
accrue on them.
80
31 C.F.R. § 285.5(d)(12). A creditor agency can certify to Treasury’s Fiscal Service that
the offset amount allowed by law would result in financial hardship and that a lesser offset
amount is reasonable and appropriate based on the debtor’s financial circumstances.
Education has separate processes for granting financial hardship exemptions for each
type of offset, such as Social Security benefits and federal tax refunds.
81
IRS Collection Financial Standards are available at:
https://www.irs.gov/businesses/small-businesses-self-employed/collection-financial-
standards. Under these standards, IRS has established a specified allowable amount for
food, clothing, and certain other expenses instead of requiring monthly statements.
Education Neither
Provides Older Borrowers
Information about the
Financial Hardship
Exemption Unless
Requested Nor Does it
Review These Exemptions
after Initial Approval
Page 40 GAO-17-45 Social Security Offsets
Figure 11: Application and Review Process for Hardship Exemption or Reduction from Social Security Offset
According to Education’s data, more borrowers request a financial
hardship exemption rather than a reduction in offset. Education reported
that in fiscal year 2015, it received 12,573 requests for a financial
hardship exemption from Social Security offsets from borrowers of all
ages.
82
During that same time frame, Education also received 2,631
requests for a reduction in Social Security offsets. While Education
officials said they do not formally track the volume of hardship exemption
and reduction approvals, they estimated that the majority of materially
complete applications are approved. According to our analysis of NSLDS
and Treasury Offset Program data, among borrowers 50 and older at the
time of their initial Social Security offset, 16 percent obtained a hardship
82
These data from Education were not available by age and include both older and
younger borrowers.
Page 41 GAO-17-45 Social Security Offsets
exemption and 5 percent obtained a hardship reduction at some point
while they were in offset from fiscal years 2001 through 2015.
83
However, we found that Education does not make information about the
existence of the financial hardship exemption option or application
process generally available to borrowers subject to Social Security offset.
Although borrowers who are subject to offset may request a financial
hardship exemption or reduction, information about this option is not
generally available because neither Education’s website nor forms sent to
borrowers regarding offset inform them about these options. If borrowers
are aware of this option—for example, as a result of information from an
advocacy group–and contact Education or their servicer and state they
are experiencing a financial hardship due to offset, then Education or the
servicer would provide information to borrowers about the option and
application process, including the Financial Status Statement to
document their income and expenses.
84
Standards for Internal Control in
the Federal Government state that agencies should externally
communicate necessary information to achieve the agency’s objectives.
85
Although Education has established a financial hardship exemption
option, officials acknowledged that the agency has not taken steps to
proactively inform borrowers about this option or process. For example,
Education’s website does not include information on the hardship
exemption process in relation to the Treasury Offset Program.
86
In
addition, the financial hardship exemption application form is not included
under “Offset Forms” in the website’s section on “Forced Collections.”
Education officials said that borrowers may use the Financial Disclosure
Statement for Wage Garnishment Hearings available on the website—
instead of the Financial Status Statement sent by Education to those who
initially contact and inform the agency of their financial hardship—to
submit their income and expenses for the financial hardship exemption
review. However, this option is not noted on the website. Moreover, the
offset notice sent to borrowers does not provide information on the
83
As described earlier, 5 years after a borrower’s initial offset, a slightly lower share of
borrowers were currently receiving a hardship exemption or reduction—6 percent and 4
percent, respectively.
84
For example, external from Education’s website, borrowers can find information on the
hardship exemption option on a website maintained by an advocacy group,
www.studentloanborrowerassistance.org.
85
GAO-14-704G.
86
https://myeddebt.ed.gov.
Page 42 GAO-17-45 Social Security Offsets
financial hardship exemption option or process. This notice is sent to
borrowers 65 days prior to the start of an offset and informs them of
options for objecting to collection of the debt. In contrast, the notice IRS
sends to individuals with delinquent federal tax debt subject to the
Federal Payment Levy Program provides information on how to avoid
having Social Security income withheld in cases of financial hardship.
87
By providing information about the existence of the hardship exemption
option and its application process, Education could better serve
borrowers who have little or no discretionary income—including those
receiving benefits below the poverty guideline—and who may be eligible
for permitted relief.
Borrowers who apply can be approved for a financial hardship exemption
or reduction for a 1-year period, but these exemptions, once granted, are
not subject to further review and remain in place indefinitely because
there is no annual review process. According to Education officials,
financial hardship exemptions and reductions are intended to be subject
to an annual review. The approval letter sent to borrowers who are
granted a financial hardship exemption or reduction states that their
financial status will be reviewed again at the end of 12 months and that
the borrower will need to submit a new Financial Status Statement or their
offsets will resume. Standards for Internal Control in the Federal
Government also state that the entity determines an oversight structure to
fulfill responsibilities set forth by applicable guidance.
88
However,
according to Education officials, borrowers are not prompted to resubmit
the form and, as a result, may continue to receive the hardship exemption
or reduction indefinitely. Education officials said their Debt Management
and Collection System requires enhancements in order to perform an
annual review and there are no definitive plans to implement this feature.
In the absence of an annual review, some borrowers who no longer
qualify for a financial hardship exemption or reduction based on their
income and expenses may continue to avoid offset or pay a reduced
amount.
A growing number of individuals who are 50 and older have defaulted on
their student loan debt and become subject to Social Security offset,
which can have serious financial consequences for those in or
87
Available at https://www.irs.gov/pub/notices/cp91_english.pdf
88
GAO-14-704G.
Conclusions
Page 43 GAO-17-45 Social Security Offsets
approaching retirement, especially for those at lower income levels or
who are unable to work and make up for lost income. Our analysis shows
that more than half of this population was disabled and receiving Social
Security disability benefits that were reduced through offset, while others
may have been retired but relying on Social Security for most of their
income.
While the federal student aid program is designed to hold borrowers
accountable for repaying their debt, policy makers have sought to balance
this goal with preserving the income security of those who cannot do so
due to disability or old age. To that end, the Social Security offset
threshold was implemented in 1998 to reflect this balance by establishing
a minimum monthly benefit payment above the poverty guideline at that
time. Although Social Security benefits are adjusted for increased costs of
living, the effect is diminished because the offset threshold is not
comparably adjusted. The result is that thousands of individuals subject to
offset are left with benefits below the poverty guideline. By allowing the
offset to reduce benefits below the poverty guideline, the balance of
policy goals the Congress sought when enacting the Debt Collection
Improvement Act of 1996 has not been maintained.
Similarly, total and permanent disability discharge provisions were
established to assure that those who cannot work because they are
disabled are relieved from having to repay their loans. Yet, our findings
indicate that Education’s program design may make it difficult for
borrowers of any age with total and permanent disabilities to avail
themselves of this option. Education has taken important steps to identify
and conduct outreach with these borrowers, but unless a better method is
developed to allow them to verify their annual income during the 3-year
monitoring period, the majority of loans may be reinstated after initially
being approved. In addition, clearer communication from Education about
related changes in policy to borrowers subject to offset who are identified
as being eligible for a TPD discharge, including the consequences of
failing to apply for such a discharge, would help borrowers make better
decisions about managing their debt.
Lastly, unless Education takes steps to inform borrowers facing financial
hardship that they may be eligible for relief, those with little or no
discretionary income may continue to have their Social Security benefits
reduced. Improving outreach for this option while establishing an annual
review process for those who receive it will help ensure that only eligible
borrowers are exempted from offset on an ongoing basis. In establishing
such an annual review process, Education may identify lessons learned
Page 44 GAO-17-45 Social Security Offsets
from addressing challenges with such requirements in the TPD discharge
process in order to streamline information needed from borrowers.
To preserve the balance between the importance of repaying federal
student loan debt and protecting a minimum level of Social Security
benefits put in place by the Debt Collection Improvement Act of 1996,
Congress should consider modifying Social Security administrative offset
provisions, such as by authorizing the Department of the Treasury to
annually index the amount of Social Security benefits exempted from
administrative offset to reflect changes in the cost of living over time.
We are making five recommendations to the Secretary of Education. To
improve program design for Social Security offsets and related relief
options, we recommend the following actions:
• Inform affected borrowers of the suspension of offset and potential
consequences if the borrower does not take action to apply for a TPD
discharge. Such information could include notification that interest
continues to accrue and that offsets may resume once their disability
benefits are converted to retirement benefits.
• Revise forms sent to borrowers already approved for a TPD discharge
to clearly and prominently state that failure to provide annual income
verification documentation during the 3-year monitoring period will
result in loan reinstatement;
• Evaluate the feasibility and benefits of implementing an automated
income verification process, including determining whether the agency
has the necessary legal authority to implement such a process;
• Inform borrowers about the financial hardship exemption option and
application process on the agency’s website, as well as the notice of
offset sent to borrowers; and
• Implement an annual review process to ensure that only eligible
borrowers are exempted from offset for financial hardship on an
ongoing basis.
We provided a draft of this product to the Department of Education, the
Social Security Administration, and the Department of Treasury for review
and comment. Treasury provided technical comments only, which we
have incorporated where appropriate. SSA and Education generally
agreed with the findings, conclusions, and recommendations of this
Matter for
Congressional
Consideration
Recommendations for
Executive Action
Agency Comments
and Our Evaluation
Page 45 GAO-17-45 Social Security Offsets
report, and provided written comments that are reproduced in appendixes
V and VI. Education also provided technical comments, which we have
incorporated where appropriate.
In its written comments, Education noted that there are a growing number
of older Americans with student loan debt and that this population
experiences higher rates of default. Moreover, Education recognized the
importance of improving and streamlining communications with these
borrowers. To better inform borrowers whose offsets are suspended
without applying for a TPD discharge, Education said it will implement a
process to notify borrowers about the suspension. In addition, Education
said it will take steps to improve the clarity of the TPD discharge forms
and determine if the department has the legal authority and operational
capability to automate the income verification process during the 3-year
monitoring period. We agree that Education should take these steps to
better inform borrowers and streamline the income verification process.
We also appreciate Education’s willingness to review the TPD discharge
forms. In doing so it is important to ensure that the forms clearly and
prominently state that unless the income verification form is completed
and returned—even if a borrower has no income to report—their loans
will be reinstated.
Regarding the financial hardship exemption option, Education generally
agreed with both recommendations and said it will take steps to inform
borrowers about the option and application process. Education said it
plans to revise its website to include such information but noted that the
notice of offset is sent by Treasury. While Treasury sends a notice of
offset to borrowers, Education sends borrowers a separate notice of
offset that provides details on the loans eligible for offset and informs
borrowers of their options to avoid offset. In addition to the options
already described on Education’s form, including the option for borrowers
to apply for a financial hardship exemption from Social Security offset
would provide borrowers more complete information. We appreciate
Education’s willingness to coordinate with Treasury to improve
communication with borrowers about the availability of this relief option,
but we continue to believe that Education should provide comprehensive
information on relief options in the form Education sends borrowers.
Education also noted that it plans to automate the process for tracking
financial hardship exemptions, which will allow for regular reviews to
ensure that only eligible borrowers are exempted. However, Education
said that due to funding limitations the implementation of these
improvements has not been scheduled. We encourage Education to take
the necessary steps to implement an annual review process.
Page 46 GAO-17-45 Social Security Offsets
As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies to the Secretary of
Education, the Secretary of the Treasury, and the Acting Commissioner of
the Social Security Administration. In addition, the report will be available
at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-7215 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix VII.
Allison Bawden
Acting Director, Education, Workforce and Income Security
Appendix I: Objectives, Scope, and
Methodology
Page 47 GAO-17-45 Social Security Offsets
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.
To answer our research objectives, we analyzed administrative data from
Education, the Department of the Treasury’s (Treasury) Bureau of the
Fiscal Service (Fiscal Service), and the Social Security Administration
(SSA). Specifically, we obtained and linked administrative data from
Fiscal Service’s Treasury Offset Program to Education’s National Student
Loan Data System (NSLDS) and SSA’s Master Beneficiary Record (MBR)
and Disability Control File (DCF) in order to examine the student loan
history and outcomes for older Americans with Social Security offsets. We
also examined aggregated data provided by Education on the total
number of borrowers in default and offset by age and the total
outstanding federal student loan balance by age.
In addition, we reviewed relevant federal laws, regulations, and
documentation. We also interviewed agency officials to obtain information
about offsets of Social Security benefits, as well as Education’s
processes for discharging student loan debt in cases of disability and
claiming an exemption or reduction from offset due to financial hardship.
We obtained documentation from agency officials, including forms sent to
borrowers during the application and approval process for both Total and
Permanent Disability (TPD) discharges and financial hardship
exemptions. To further examine the TPD discharge process, we analyzed
aggregated data provided by Education’s TPD servicer on TPD discharge
applications, approvals, and reinstatements, including the total volume
and dollar value. To identify the amount Education collected on defaulted
student loans through offsets and other payment mechanisms, we
analyzed data provided by Education’s Default Resolution Group,
including aggregated data from the Debt Management and Collection
System and information reported by guaranty agencies. We also
analyzed aggregated data provided by Fiscal Service on fees assessed
by the Treasury Offset Program by type of offset for Education and other
federal agencies.
Finally, we analyzed published data from the 2013 wave of the Federal
Reserve Board’s Survey of Consumer Finances (SCF) to update figures
Appendix I: Objectives, Scope, and
Methodology
Appendix I: Objectives, Scope, and
Methodology
Page 48 GAO-17-45 Social Security Offsets
which we previously reported on the overall share of households with
student loan debt with the most recent data available.
1
This updated data
is available in appendix III. The SCF gathers various economic and
financial data at the household level, such as student loan, mortgage, and
credit card debt, and is conducted once every 3 years. Because survey
responses are based on the financial situation of an entire household, not
just the head of household, it is possible that the reported student loan
debt for some households headed by older Americans is held by children
or other dependents that are still members of the household.
In order to identify the population of older Americans subject to Social
Security offset in NSLDS, we linked NSLDS data to Treasury Offset
Program and SSA data because Education does not receive information
on the type of offset (e.g., Social Security, federal tax refund, etc.).
Similarly, Treasury Offset Program data contain only aggregate
information about the amount of debt a borrower owes to Education and
does not have details on the Social Security benefit being offset, such as
whether it is a retirement, survivor, or disability benefit. Using these linked
data, we examined information on borrowers’ loans, such as the
disbursement and default dates for the loans that became subject to
Social Security offset, to determine how old the loans are and how long
they have been in default. In addition, we examined how long individuals
were subject to offset and what happened to them 5 years after their
initial offset payment. More information about each individual dataset is
found below.
The Treasury Offset Program carries out transactions for offsetting
federal payments for delinquent nontax debt. We obtained record-level
data for 480,097 individuals who were subject to offset of Social Security
benefit payments due to a defaulted debt owed to Education from fiscal
year 2001 to 2015, including information on the amount and date of
offsets.
1
Federal Reserve Survey of Consumer Finances (SCF), Historic Tables and Charts,
http://www.federalreserve.gov/econresdata/scf/scfindex.htm. For prior GAO work, see
GAO, Older Americans: Inability to Repay Student Loans May Affect Financial Security of
a Small Percentage of Retirees, GAO-14-866T (Washington, D.C.: Sept. 10, 2014).
Treasury, NSLDS, and
SSA data
Treasury Offset
Program data
Appendix I: Objectives, Scope, and
Methodology
Page 49 GAO-17-45 Social Security Offsets
NSLDS is Education’s central database for information on federal
financial aid for higher education, including student loans. We obtained
record-level data on borrowers’ loan histories from NSLDS on 477,867
individuals identified from the Treasury Offset Program data as having
been subject to offset of Social Security benefit payments due to
defaulted federal student loans at some time from fiscal year 2001 to
2015. A small proportion of the individuals—about 0.46 percent—who
were identified through the Treasury Offset Program data did not match to
student loan records in NSLDS. According to Education officials, debt
owed to Education can also result from overpayments of federal
education grants such as Pell grants, and grant recipients who do not
repay this debt timely are submitted to Treasury for offset.
We examined a variety of information from NSLDS for borrowers with
Social Security benefit offsets, including loan disbursement dates, default
dates, loan statuses, and loan balances over time. Analyses that used
NSLDS data on loan balances were restricted to fiscal year 2006 forward
because NSLDS did not consistently retain detailed loan balance history
prior to 2006. Analyses of borrower outcomes over time were restricted to
borrowers who entered offset early enough that sufficient time had
elapsed to observe the outcomes over the entire length of time, as noted
in the report.
SSA’s MBR contains administrative records of Social Security
beneficiaries. We obtained record-level data on the ages of borrowers
certified for offset for Education debt from fiscal year 2001 to 2015, as
well as the types and amounts of benefits they received. SSA’s DCF
contains additional administrative data on Social Security Disability
Insurance beneficiaries. From the DCF, we obtained information on the
continuing disability review category (e.g., the determination that medical
improvement is not expected) for the population of borrowers identified
from the Treasury Offset Program data.
2
We conducted a data reliability assessment of the summary and record-
level administrative data we used by reviewing documentation on the
datasets, requesting and reviewing the queries used to generate the data
2
For more information on SSA’s continuing disability review process, see GAO, Social
Security Disability: SSA Could Increase Savings by Refining Its Selection of Cases for
Disability Review, GAO-16-250 (Washington, D.C.: Feb. 11, 2016).
NSLDS data
SSA MBR and DCF
data
Data Reliability
Appendix I: Objectives, Scope, and
Methodology
Page 50 GAO-17-45 Social Security Offsets
extracts, and interviewing officials about how the data are collected and
their appropriate uses. When possible, we compared our summary-level
data to publicly reported information to ensure completeness and
accuracy. Additionally, we performed electronic testing of the record-level
linked administrative data to identify missing or unreliable data and to
resolve discrepancies across the separate data sources. In particular,
• Date of birth: NSLDS was missing date of birth information for some
borrowers. To ensure we had a reliable date of birth variable, we also
obtained date of birth information in the MBR data. We compared
these two sources to identify and resolve discrepancies, including
using dates of loan disbursement to ensure that date of birth was
consistent with plausible borrower ages at time of loan disbursement.
• Consolidation loans: In determining the length of time borrowers
held loans prior to offset, we matched consolidation loans to the
underlying closed loans that were paid off via consolidation and
included information on these loans. We excluded all other loans that
were paid off prior to offset.
• Application of offset payments: NSLDS did not always contain
complete information on the application of offset payments across
loan principal, interest on the outstanding balance, and program fees
due to data reporting issues. We measured the total amount of offset
payments and the number of individual offset transactions per
borrower using Treasury Offset Program data. We only included a
borrower in our analysis if we were able to identify the application of
the offset payment for a majority of the borrower’s individual offset
transactions.
• Death discharges: Loan discharges due to death may not occur
immediately after a borrower’s death because Education requires
documentation of the death.
3
When we identified a borrower as
deceased through the MBR data, we considered the borrower to have
received a death discharge as of the month of the borrower’s death,
regardless of whether a death discharge was indicated in the NSLDS
data.
Through our testing, we identified some data elements that were not
sufficiently reliable, and we did not use these data elements in our
analysis. Additionally, in certain analyses we were unable to calculate
measures for a small proportion of borrowers, and we note these
3
34 C.F.R. §§ 682.402(b) and 685.212(a).
Appendix I: Objectives, Scope, and
Methodology
Page 51 GAO-17-45 Social Security Offsets
limitations in the report. We excluded 13 borrowers for whom no date of
birth could be determined from all analyses, and we excluded 33
borrowers for whom MBR data was unavailable from analyses that
required MBR data elements. For purposes of our analysis, we found the
data elements we ultimately reported on to be sufficiently reliable based
on this assessment.
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Page 52 GAO-17-45 Social Security Offsets
The total amount of federal student loan debt held by borrowers age 50
and older is considerably less than for younger age groups. Figure 12
shows the total dollar amount of federal student loan debt held by
borrowers of all ages and older Americans in particular, since fiscal year
2005.
Figure 12: Outstanding Federal Student Loan Balances by Age Group for Fiscal
Years 2005, 2010, and 2015
While fewer older Americans hold student loan debt, the rate of increase
in the number of older borrowers and the amount of their debt far
outpaced younger borrowers (see fig. 13).
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Trends in Federal
Student Loan Debt,
Default, and Offset
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Page 53 GAO-17-45 Social Security Offsets
Figure 13: Percentage Increase in the Number of Borrowers and their Outstanding
Federal Student Loan Balances from Fiscal Years 2005 to 2015
As the number of federal student loan borrowers and the amount of debt
have increased over time, so have the number of borrowers who are in
default and subject to an offset of any federal payment. Data from
Education show that, from fiscal years 2005 to 2015, the total number of
borrowers of all ages in default increased from about 4.3 million to 8.6
million. The corresponding increase in the number of borrowers subject to
any offset was from about 387,000 to slightly more than 1 million.
1
Over
the same time period, borrowers were increasingly likely to default on
their loans and become subject to offset. The share of borrowers of all
ages in default increased from about 15 percent in default in fiscal year
2005 to 19 percent in fiscal year 2015 while the share of borrowers in
offset increased from 1.4 percent in fiscal year 2005 to 2.3 percent in
fiscal year 2015.
1
Some borrowers in default may not be subject to offset. For example, some borrowers
may not have been in default long enough to have their debt certified for offset or they
may not receive federal payments that are subject to offset, such as Social Security
benefits or federal tax refunds.
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Page 54 GAO-17-45 Social Security Offsets
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. As shown in figure 14, there are
more borrowers subject to Social Security offsets who received disability
benefits compared to retirement or survivor benefits. Once disabled
beneficiaries reach their full retirement age (currently age 66 for people
born in 1943-1954), disability benefits are automatically converted to
retirement benefits. Thus, for defaulted borrowers age 65 and older, the
vast majority—95 percent—received retirement or survivor benefits.
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Page 55 GAO-17-45 Social Security Offsets
Figure 14: Number of Borrowers with Social Security Offsets for Federal Student
Loan Debt in Fiscal Years 2002 and 2015
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Page 56 GAO-17-45 Social Security Offsets
The majority of older borrowers hold loans taken out for their own
education rather than for their children’s education. According to data
from Education, about 31 percent of borrowers age 50 to 64 had loans
taken out for their children’s education in fiscal year 2015. Among
borrowers age 65 and older, this figure was less, about 24 percent.
Instances of default are substantially lower for older Americans with loans
for their children’s education compared to student loans for their own
education. In fiscal year 2015, the share of borrowers age 50 to 64 with
Parent PLUS loans in default was 10 percent compared to 35 percent for
those with student loans. Likewise, the share of borrowers age 50 to 64
with Parent PLUS loans in offset was about 1 percent compared to 3
percent for those with student loans.
Many older borrowers who held student loans for an extended period of
time had also been in default for a decade or more before becoming
subject to Social Security offset.
2
About 68 percent of borrowers who
eventually became subject to Social Security offset were not yet receiving
Social Security retirement, disability or survivor benefits when they
defaulted on their student loans. Among these borrowers, most had been
in default for a decade or more before becoming subject to Social
Security offset, and just over 20 percent of these borrowers had been in
default for 20 or more years at the time they became subject to offset.
Other older Americans who were already receiving Social Security
benefits at the time of default became subject to offset within shorter
timeframes. About 71 percent of borrowers who were already receiving
Social Security benefits when they defaulted on their student loans
became subject to offset within 3 years after their default. We previously
reported that under Education’s annual process for certifying defaulted
debt for offset, Education sends the defaulted debt to Fiscal Service
between 17 and 29 months after the last payment on the debt.
3
Not all
2
We included only borrowers who first became subject to offset in 2004 or later in our
analyses of the length of time borrowers were in default. Borrowers whose initial offsets
occurred in the early years of the program cannot be included in these analyses as they
may have been in default for many years before Fiscal Service began offset of Social
Security benefit payments in mid-2001.
3
GAO-14-866T. This annual certification process was still in place at the time of our
review. According to the independent auditors’ reports accompanying Federal Student
Aid’s financial statements for fiscal years 2014 and 2015, Education’s annual certification
process does not comply with statutory timeframes for referring past-due federal nontax
debts to Treasury for administrative offset. It was beyond the scope of our review to
evaluate Education’s compliance with these statutory timeframes.
Older Borrowers with
Student and Parent
PLUS Loans
Length of Time in
Default Prior to Offset
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Page 57 GAO-17-45 Social Security Offsets
defaulted borrowers receiving Social Security benefits are immediately
subject to offset: For example, borrowers whose benefit amount is below
$750 per month are not subject to offset but may later become subject to
offset if cost of living adjustments increase their benefits above the $750
threshold. About 20 percent of older borrowers who were receiving Social
Security benefits at the time of their default became subject to offset 5 or
more years after their default.
4
Older borrowers who became subject to Social Security offsets tended to
have relatively lower outstanding student loan balances compared to
other older borrowers who were not in default. As shown in table 3, the
average amount of debt held by these older borrowers with Social
Security offsets was less than the average for older borrowers who were
not in default.
5
Looking only at borrowers in default, older borrowers who
became subject to Social Security offsets owed more than the average for
all defaulted borrowers of their age.
4
For additional details on the length of time borrowers were in default on their student
loans prior to Social Security benefit offset, see appendix III, tables 21 and 22.
5
Consistent with the work of other researchers, we find that borrowers who are in default
tend to owe less on student loans than borrowers with loans in good standing. For an
example, see Meta Brown, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert
van der Klaauw, “Looking at Student Loan Defaults through a Larger Window,” Federal
Reserve Bank of New York Liberty Street Economics Blog, February 2015.
Student Loan
Balances of Older
Borrowers with Social
Security Offsets
Compared to Other
Older Borrowers
Appendix II: Additional Data Analysis of
Student Loan Debt for Older Americans
Page 58 GAO-17-45 Social Security Offsets
Table 3: Average Student Loan Balance of Borrowers 50 and Older, by Loan Status
Loan status
Fiscal Year
All borrowers
50 and older
Loans in good
standing
All loans in
default
Defaulted loans
with Social
Security offset
2006
$16,200
$19,150
$8,000
$11,900
2009
$19,600
$23,050
$10,000
$14,600
2012
$23,900
$27,950
$13,300
$17,500
2015
$28,600
$33,900
$16,050
$22,050
Source: GAO analysis of data from the Departments of Education and the Treasury, and the Social Security Administration. |
GAO-17-45
Note: Figures not adjusted for inflation.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 59 GAO-17-45 Social Security Offsets
Table 4: Incidence of Debt by Age of Head of Household and Type of Debt, 2013
Age of head of household
Mortgage
a
Credit card
Student
Vehicle
Any debt
18-34
28.6%
36.8%
41.7%
35.2%
77.1%
35-44
52.7
41.7
28.7
37.0
84.8
45-54
55.3
44.3
18.6
36.5
82.3
55-64
45.8
43.4
12.0
30.8
78.7
65-74
38.9
32.8
3.1
24.4
66.4
75 and older
18.6
21.1
*
10.7
41.4
Total, all ages
41.5
38.1
20.0
30.9
74.5
Source: Federal Reserve Survey of Consumer Finances (SCF), Historic Tables and Charts, http://www.federalreserve.gov/econresdata/scf/scfindex.htm. | GAO-17-45
*Ten or fewer observations.
a
Data in this column reflect home mortgage debt other than home equity lines of credit.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student
Loan Debt
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 60 GAO-17-45 Social Security Offsets
Table 5: Number of Student Loan Borrowers Less than Age 50 by Type of Loan and Status, Fiscal Years 2005 to 2015
Fiscal
Year
All
Default
Default and Offset
Parent
PLUS
Student
Total
Parent
PLUS
Student
Total
Parent
PLUS
Student
Total
2005
810,144
23,887,158
24,577,159
29,936
3,329,956
3,357,025
2,420
314,156
316,471
2006
771,214
24,999,564
25,631,427
32,262
3,361,943
3,391,145
2,530
300,543
302,965
2007
745,804
26,092,324
26,701,637
35,745
3,514,787
3,547,049
3,415
364,638
367,920
2008
762,334
27,360,026
27,984,764
40,115
3,744,642
3,780,695
4,830
508,964
513,569
2009
817,605
29,232,837
29,905,884
44,209
3,940,626
3,980,146
4,755
462,295
466,824
2010
902,752
31,092,246
31,831,296
50,528
4,282,043
4,326,900
4,939
475,693
480,441
2011
992,632
32,763,084
33,566,167
56,679
4,597,257
4,647,334
5,769
557,192
562,714
2012
985,722
34,177,462
34,950,523
67,106
5,145,714
5,204,730
5,250
567,265
572,176
2013
937,795
35,230,852
35,956,971
71,284
5,593,468
5,655,282
8,895
711,433
719,927
2014
905,399
36,121,628
36,812,471
73,390
5,976,766
6,039,462
9,586
781,341
790,432
2015
915,960
36,670,319
37,355,550
73,291
6,318,389
6,379,955
8,995
824,970
833,334
Source: GAO analysis of data from the National Student Loan Data System, Department of Education. | GAO-17-45
Note: Default and offset category includes borrowers with offsets from any type of federal payment,
such as tax refunds, and includes but is not limited to borrowers with Social Security benefit offsets.
Table 6: Number of Student Loan Borrowers Age 50 to 64 by Type of Loan and Status, Fiscal Years 2005 to 2015
Fiscal
Year
All
Default
Default and Offset
Parent
PLUS
Student
Total
Parent
PLUS
Student
Total
Parent
PLUS
Student
Total
2005
1,077,817
1,940,604
2,881,615
74,726
674,279
742,553
6,630
53,206
59,540
2006
1,059,602
2,262,279
3,153,974
78,567
731,331
803,183
6,781
54,700
61,153
2007
1,085,746
2,534,001
3,438,999
84,485
799,786
877,005
8,932
70,368
78,832
2008
1,177,766
2,769,534
3,742,961
93,343
876,922
962,253
13,946
128,941
142,121
2009
1,316,362
3,050,487
4,138,760
102,563
958,245
1,051,702
16,544
156,085
171,628
2010
1,484,615
3,356,906
4,589,359
117,314
1,051,770
1,158,427
13,113
96,290
108,774
2011
1,656,568
3,616,339
5,000,340
132,277
1,139,452
1,259,587
15,682
113,045
127,985
2012
1,764,217
3,876,878
5,356,444
155,293
1,279,393
1,420,198
15,015
121,911
136,269
2013
1,841,956
4,129,138
5,678,787
170,880
1,391,323
1,545,397
19,519
131,779
150,550
2014
1,917,582
4,392,501
6,010,338
186,823
1,506,902
1,674,339
23,678
141,667
164,422
2015
1,975,287
4,627,777
6,301,821
204,493
1,632,236
1,814,152
24,398
144,769
168,090
Source: GAO analysis of data from the National Student Loan Data System, Department of Education. | GAO-17-45
Note: Default and offset category includes borrowers with offsets from any type of federal payment,
such as tax refunds, and includes but is not limited to borrowers with Social Security benefit offsets.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 61 GAO-17-45 Social Security Offsets
Table 7: Number of Student Loan Borrowers Age 65 and Over by Type of Loan and Status, Fiscal Years 2005 to 2015
Fiscal
Year
All
Default
Default and Offset
Parent
PLUS
Student
Total
Parent
PLUS
Student
Total
Parent
PLUS
Student
Total
2005
65,394
117,620
179,292
15,400
61,301
75,998
2,302
6,413
8,661
2006
66,819
141,195
203,506
16,871
69,184
85,237
2,301
7,025
9,256
2007
70,862
169,212
234,881
18,873
78,967
96,866
3,123
9,733
12,750
2008
79,304
204,538
277,137
21,578
92,102
112,502
5,506
21,292
26,606
2009
88,905
244,144
324,671
24,055
105,939
128,629
8,883
31,488
40,044
2010
101,504
290,632
381,656
27,125
121,508
146,982
4,602
14,442
18,851
2011
117,616
339,267
444,059
30,323
138,102
166,497
5,280
17,563
22,587
2012
141,064
418,819
543,123
36,567
170,322
204,481
4,483
23,137
27,420
2013
162,456
497,337
639,271
41,546
195,445
234,189
5,309
27,657
32,733
2014
186,142
590,089
751,601
47,435
228,303
272,422
6,461
31,255
37,427
2015
210,256
687,927
869,988
55,200
269,582
320,758
7,339
33,009
40,043
Source: GAO analysis of data from the National Student Loan Data System, Department of Education. | GAO-17-45
Note: Default and offset category includes borrowers with offsets from any type of federal payment,
such as tax refunds, and includes but is not limited to borrowers with Social Security benefit offsets.
Table 8: Outstanding Federal Student Loan Balances by Age Group from Fiscal Years 2005-2015
Fiscal Year
Less than 25
25-49
50-64
65 and older
2005
$66,440,281,262
$303,629,618,145
$43,373,976,585
$2,013,549,282
2006
$70,595,220,829
$338,720,890,555
$51,815,616,467
$2,542,482,521
2007
$75,137,874,848
$378,809,273,116
$61,085,030,923
$3,253,432,360
2008
$81,891,069,030
$422,195,848,189
$70,813,210,183
$4,239,990,040
2009
$95,100,445,799
$474,851,982,672
$82,097,330,046
$5,363,239,378
2010
$108,447,306,208
$535,600,192,014
$95,454,805,652
$6,758,473,524
2011
$122,311,345,220
$606,115,402,757
$112,736,426,400
$8,764,815,772
2012
$133,597,809,027
$677,455,576,769
$129,521,859,341
$11,500,274,885
2013
$140,198,344,120
$743,322,199,652
$146,063,755,043
$14,229,734,658
2014
$142,505,339,872
$808,781,778,261
$164,611,364,176
$17,673,022,482
2015
$139,988,882,339
$871,052,477,325
$183,412,049,596
$21,680,371,417
Source: GAO analysis of data from the National Student Loan Data System, Department of Education. | GAO-17-45
Note: Figures not adjusted for inflation.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 62 GAO-17-45 Social Security Offsets
Table 9: Student Loan Balances of Borrowers Under 50 When First Subject to Offset, Fiscal Years 2006 to 2015
Fiscal year
Share of
borrowers with
loan balance
under $10,000
$10,000 to less
than $25,000
$25,000 to less
than $50,000
$50,000 to less
than $100,000
$100,000 or more
Total Number of
Borrowers Fi
rst
Subject to Offset
2006
67.93
22.04
6.64
2.79
0.61
7,202
2007
65.83
22.54
8.06
2.88
0.69
8,426
2008
62.06
24.37
9.27
3.53
0.78
10,553
2009
61.58
24.92
8.93
3.72
0.86
13,505
2010
59.68
24.70
10.38
4.35
0.89
13,458
2011
57.38
25.52
10.83
5.02
1.25
14,575
2012
57.20
26.20
10.71
4.87
1.02
18,620
2013
53.49
27.05
12.38
5.82
1.25
22,584
2014
49.97
27.42
13.80
7.23
1.57
19,437
2015
48.21
28.88
14.11
7.16
1.64
19,973
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Figures not adjusted for inflation. Table excludes 3,185 borrowers for whom it was not possible
to determine a loan balance.
Table 10: Student Loan Balances of Borrowers 50-64 When First Subject to Offset, Fiscal Years 2006 to 2015
Fiscal year
Share of
borrowers with
loan balance
under $10,000
$10,000 to less
than $25,000
$25,000 to less
than $50,000
$50,000 to less
than $100,000
$100,000 or more
Total Number of
Borrowers First
Subject to Offset
2006
66.92
22.47
6.83
3.06
0.72
8,029
2007
66.03
22.98
7.54
2.76
0.69
9,854
2008
63.42
23.68
8.46
3.48
0.96
12,198
2009
60.89
24.91
8.93
4.12
1.14
15,394
2010
58.46
25.00
9.81
4.96
1.77
15,854
2011
56.01
25.80
10.61
5.66
1.91
17,476
2012
57.80
24.45
10.61
5.27
1.88
22,192
2013
53.59
26.46
11.56
6.24
2.15
28,491
2014
52.52
25.40
12.20
7.06
2.83
24,804
2015
51.64
26.31
12.20
7.08
2.77
26,712
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Figures not adjusted for inflation. Table excludes 3,220 borrowers for whom it was not possible
to determine a loan balance.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 63 GAO-17-45 Social Security Offsets
Table 11: Student Loan Balances of Borrowers 65 or Older When First Subject to Offset, Fiscal Years 2006 to 2015
Fiscal year
Share of
borrowers with
loan balance
under $10,000
$10,000 to less
than $25,000
$25,000 to less
than $50,000
$50,000 to less
than $100,000
$100,000 or more
Total Number of
Borrowers First
Subject to Offset
2006
64.71
24.21
7.53
2.72
0.83
2,536
2007
63.04
23.90
8.37
3.60
1.09
3,309
2008
59.54
24.56
9.62
4.51
1.77
3,836
2009
59.52
24.13
9.97
4.54
1.83
4,973
2010
54.72
25.44
11.24
5.69
2.91
4,536
2011
51.47
24.95
13.01
7.27
3.29
4,826
2012
52.78
25.27
11.86
6.73
3.36
7,653
2013
49.86
26.01
12.56
7.63
3.94
10,556
2014
48.39
23.93
13.52
9.09
5.07
9,118
2015
45.89
25.08
13.65
9.55
5.82
10,592
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Figures not adjusted for inflation. Table excludes 1,112 borrowers for whom it was not possible
to determine a loan balance.
Table 12: Average Student Loan Balance of Borrowers Under 50, By Loan Status, Fiscal Years 2006 to 2015
Fiscal year
Average balance for
all borrowers under 50
Average balance for
borrowers with loans in
good standing
Average balance for
borrowers with loans in
default
Average balance for
borrowers with Social
Security benefit offsets
2006
$15,969
$17,235
$7,669
$11,273
2007
17,001
18,333
8,303
12,049
2008
18,013
19,425
8,971
13,131
2009
19,058
20,504
9,638
13,453
2010
20,233
21,808
10,220
14,302
2011
21,701
23,362
11,364
15,670
2012
23,206
25,141
12,144
15,233
2013
24,572
26,763
12,828
16,724
2014
25,841
28,303
13,300
18,660
2015
27,065
29,673
14,406
19,147
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 64 GAO-17-45 Social Security Offsets
Table 13: Average Student Loan Balance of Borrowers 50-64, By Loan Status, Fiscal Years 2006 to 2015
Fiscal year
Average balance for
all borrowers 50-64
Average balance for
borrowers with loans
in good standing
Average balance for
borrowers with loans in
default
Average balance for
borrowers with Social
Security benefit offsets
2006
$16,429
$19,272
$8,105
$11,836
2007
17,762
20,845
8,756
11,904
2008
18,919
22,178
9,502
13,115
2009
19,836
23,140
10,138
14,202
2010
20,799
24,130
10,935
15,926
2011
22,546
25,825
12,806
17,154
2012
24,181
28,017
13,548
16,531
2013
25,721
29,947
14,418
18,287
2014
27,388
32,100
15,185
19,878
2015
29,105
34,261
16,350
20,049
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Table 14: Average Student Loan Balance of Borrowers 65 and Older, By Loan Status, Fiscal Years 2006 to 2015
Fiscal year
Average balance for all
borrowers 65 and Older
Average balance for
borrowers with loans in
good standing
Average balance for
borrowers with loans
in default
Average balance for
borrowers with Social
Security benefit offsets
2006
$12,493
$16,334
$7,164
$12,063
2007
13,851
18,177
7,689
13,310
2008
15,299
20,058
8,335
15,422
2009
16,519
21,608
8,763
15,899
2010
17,708
22,835
9,522
18,694
2011
19,738
24,904
11,126
21,021
2012
21,174
26,903
11,686
20,378
2013
22,259
27,796
12,682
22,442
2014
23,514
29,235
13,450
25,216
2015
24,920
31,059
14,410
27,058
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 65 GAO-17-45 Social Security Offsets
Table 15: Share of Student Loan Borrowers with Various Outcomes 5 Years after Their Initial Social Security Offset by Age,
Fiscal Years 2001 to 2010
Outcome
Age at Initial Social Security
Offset
Under 50
50 to 64
65 and older
Loans closed - total
37.17
44.35
48.06
Paid off
19.93
22.21
26.49
Discharged – Other
0.61
1.01
0.97
Discharged – Death
8.78
12.64
15.12
Discharged – Total and
Permanent Disability (TPD)
7.84
8.49
5.48
Loans open – total
62.83
55.65
51.94
Rehabilitated or consolidated –
total
17.74
13.60
12.67
In repayment
11.51
10.33
9.97
Forbearance or deferment
6.22
3.27
2.70
Applied for TPD, in 3-year
monitoring period
6.85
6.42
3.52
Defaulted – total
38.24
35.63
35.75
Offset resumed/still in offset
21.00
20.00
21.62
Other, no offset
7.24
5.47
4.91
Hardship exemption from offset
5.97
6.02
5.72
Hardship reduction in offset
4.04
4.14
3.50
Number of borrowers in age
group:
91,425
96,519
28,525
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Data on 5-year outcomes include borrowers who became subject to offset prior to fiscal year
2011 in order to observe borrowers for a full 5-year time period through fiscal year 2015.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 66 GAO-17-45 Social Security Offsets
Table 16: Share of Student Loan Borrowers with Various Outcomes 5 Years after Their Initial Social Security Offset by
Duration of Offset, Fiscal Years 2001 to 2010
Outcome
Age of borrower
at time of
initial offset
Under 50
50-64
Over 65
Duration of time
in offset
Duration of time
in offset
Duration of time
in offset
Less than
1 year
1 year or
more
Less than
1 year
1 year or
more
Less than 1
year
1 year or
more
Loans closed - total
40.30
32.85
49.13
38.50
55.22
40.94
Paid off
19.24
20.89
22.37
22.02
29.79
23.21
Discharged – Other
0.68
0.52
1.11
0.89
1.32
0.62
Discharged – Death
10.29
6.71
14.29
10.62
16.45
13.79
Discharged – Total
and Permanent
Disability (TPD)
10.09
4.73
11.36
4.97
7.66
3.32
Loans open - total
59.71
67.15
50.88
61.50
44.78
59.07
Rehabilitated or
consolidated – total
21.39
12.69
16.94
9.50
16.93
8.45
In repayment
13.92
8.19
12.82
7.27
13.22
6.75
Forbearance or
deferment
7.47
4.50
4.12
2.23
3.71
1.70
Applied for TPD, in
3-year monitoring
period
7.74
5.62
7.67
4.88
4.03
3.01
Defaulted – total
30.58
48.84
26.27
47.12
23.82
47.61
Offset resumed/still
in offset
15.34
28.82
13.15
28.42
11.74
31.44
Other, no offset
7.27
7.20
5.45
5.48
5.17
4.65
Hardship exemption
from offset
5.51
6.59
5.42
6.76
5.11
6.33
Hardship reduction
in offset
2.46
6.23
2.25
6.46
1.80
5.19
Number of borrowers
in category:
53,038
38,387
53,195
43,324
14,217
14,308
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Data on 5-year outcomes include borrowers who became subject to offset prior to fiscal year
2011 in order to observe borrowers for a full 5-year time period through fiscal year 2015.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 67 GAO-17-45 Social Security Offsets
Table 17: Share of Borrowers Under 50 Whose Social Security Benefits Are below the Poverty Guideline after Offset for
Defaulted Federal Student Loans, Fiscal Years 2001 to 2015
Fiscal year
Benefits below poverty
guideline and further
reduced by offset
Benefits reduced below
poverty guideline
after offset
Benefits above poverty
guideline
after offset
Number of borrowers
2001
.
.
100.00
1,700
2002
.
.
100.00
14,565
2003
.
.
100.00
14,007
2004
0.59
46.09
53.32
16,281
2005
10.29
48.07
41.64
18,964
2006
19.10
42.99
37.91
20,994
2007
31.53
34.72
33.74
24,818
2008
36.73
30.60
32.67
30,402
2009
43.55
26.65
29.80
36,681
2010
42.89
26.25
30.87
40,034
2011
43.61
26.04
30.34
45,163
2012
46.83
24.44
28.73
52,639
2013
51.35
22.87
25.77
63,380
2014
54.15
21.48
24.37
66,575
2015
55.31
21.13
23.56
67,369
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Table excludes 442 borrowers for whom it was not possible to determine the Social Security
benefit amount.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 68 GAO-17-45 Social Security Offsets
Table 18: Share of Borrowers 50-64 Whose Social Security Benefits Are below the Poverty Guideline after Offset for Defaulted
Federal Student Loans, Fiscal Years 2001 to 2015
Fiscal year
Benefits below poverty
guideline and further
reduced by offset
Benefits reduced below
poverty guideline
after offset
Benefits above poverty
guideline
after offset
Number of borrowers
2001
.
.
100.00
2,988
2002
.
.
100.00
14,949
2003
.
.
100.00
14,416
2004
0.31
37.26
62.43
16,434
2005
8.39
40.74
50.87
19,600
2006
15.79
37.22
46.99
21,706
2007
27.15
30.21
42.65
26,612
2008
31.28
26.96
41.76
32,844
2009
37.86
23.39
38.75
39,647
2010
36.40
23.01
40.59
43,501
2011
36.79
22.72
40.50
49,837
2012
39.58
21.69
38.72
59,245
2013
43.86
20.81
35.34
72,765
2014
45.82
19.99
34.19
77,962
2015
46.62
19.43
33.95
78,464
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Table excludes 118 borrowers for whom it was not possible to determine the Social Security
benefit amount.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 69 GAO-17-45 Social Security Offsets
Table 19: Share of Borrowers 65 and Over Whose Social Security Benefits Are below the Poverty Guideline after Offset for
Defaulted Federal Student Loans, Fiscal Years 2001 to 2015
Fiscal year
Benefits below poverty
guideline and further
reduced by offset
Benefits reduced below
poverty guideline
after offset
Benefits above poverty
guideline after offset
Number of borrowers
2001
.
.
100.00
953
2002
.
.
100.00
5,857
2003
.
.
100.00
5,324
2004
0.53
38.39
61.08
5,494
2005
9.45
39.82
50.74
6,108
2006
18.77
34.48
46.75
6,659
2007
30.19
27.47
42.34
8,179
2008
33.93
24.07
42.00
9,873
2009
41.14
20.22
38.64
11,850
2010
37.63
20.00
42.37
12,667
2011
35.98
19.86
44.16
13,950
2012
38.88
18.31
42.81
17,520
2013
41.01
17.43
41.56
22,609
2014
42.07
15.97
41.96
24,877
2015
41.79
16.04
42.17
26,715
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Table excludes five borrowers for whom it was not possible to determine the Social Security
benefit amount.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 70 GAO-17-45 Social Security Offsets
Table 20: Length of Time Borrowers Held Student Loans at Time of Initial Social Security Offset, Fiscal Years 2001 to 2015
Length of Time
Share of borrowers
under 35 at time of
initial offset
Share of borrowers
35-49
Share of borrowers
50-64
Share of borrowers
65 and older
Less than 5 years
18.20
9.12
6.30
4.52
5-10 years
46.42
20.49
15.78
12.41
10-15 years
30.64
20.50
17.43
18.06
15-20 years
4.74
24.63
19.03
21.07
20-25 years
.
17.92
19.15
20.13
25-30 years
.
6.82
12.42
12.37
30-35 years
.
0.51
6.07
5.83
35-40 years
.
.
2.55
3.09
40 years or more
.
.
1.27
2.52
Number of borrowers in
age group:
38,416
15,1922
21,6632
66,000
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Table excludes 4,884 borrowers for whom it was not possible to determine the length of time
the borrower held loans that became subject to offset. Dashes indicate lengths of time not applicable
to an age group.
Table 21: Length of Time in Default Prior to Offset for Borrowers Not Receiving Social Security Benefits At Time of Offset,
Fiscal Years 2004-2015
Length of Time
Share of borrowers under
50 at time of initial offset
Share of borrowers
50-64
Share of borrowers
65 and older
Less than 5 years
34.06
23.24
12.39
5-10 years
24.00
17.49
14.17
10-15 years
20.83
20.08
21.60
15-20 years
15.61
20.76
24.78
20 years or longer
5.51
18.43
27.06
Number of borrowers in age
group:
87,784
133,681
32,234
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 71 GAO-17-45 Social Security Offsets
Table 22: Length of Time in Default Prior to Offset for Borrowers Receiving Social Security Benefits At Time of Offset, Fiscal
Years 2004-2015
Length of Time
Share of borrowers under 50
at time of initial offset
Share of borrowers 50-64
Share of borrowers 65 and
older
Less than 2 years
57.92
57.73
54.13
2-3 years
17.86
14.65
14.21
3-4 years
7.00
5.22
6.11
4-5 years
4.48
3.53
4.31
5 years or longer
12.75
18.86
21.24
Number of borrowers in age
group:
75,381
54,199
24,033
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Table 23: Proportion of Social Security Offset Collections Applied to Principal, Interest, and Fees on Defaulted Federal
Student Loans, Fiscal Years 2001 to 2015
Category
Age at Initial Social Security
Offset
Under 50
50 to 64
65 and older
Principal
31.15
26.83
26.31
Interest
55.74
61.00
62.18
Fees
13.11
12.17
11.50
Collections included in
calculation of percentages
$394,315,594
$469,075,139
$160,717,380
Total collections
$419,727,588
$506,759,493
$175,923,528
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Percentages were calculated excluding approximately 7.1 percent of offset collections for which
we could not accurately determine the amount applied to principal, interest and fees. The total
collections row contains all collections, including the 7.1 percent for which a further breakdown was
unavailable.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 72 GAO-17-45 Social Security Offsets
Table 24: Share of Borrowers Paying Student Loan Principal Via Social Security Offset, by Duration of Offset, Fiscal Years
2001 to 2015
Outcome
Age of borrower
at time of initial
offset
Under 50
50-64
Over 65
Duration of time
in offset
Duration of time
in offset
Duration of time
in offset
Less than 1 year
1 year or
more
Less than 1 year
1 year or
more
Less than 1 year
1 year or
more
No principal paid
57.28
35.01
62.17
43.66
58.84
45.07
Up to 50 percent of
payment applied to
principal
18.08
35.01
15.83
33.66
15.88
32.74
More than 50 percent of
payment applied to
principal
24.65
29.98
22.00
22.68
25.28
22.18
Number of borrowers
included in calculation of
percentages:
92,328
81,020
106,437
89,083
30,830
28,567
Total number of
borrowers in category:
108,189
84,247
124,845
93,850
36,069
30,653
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Percentages were calculating excluding 10.4 percent of borrowers for whom we could not
accurately determine the amount applied to principal, interest and fees. The total collections row
contains all collections, including the 10.4 percent for which a further breakdown was unavailable.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 73 GAO-17-45 Social Security Offsets
Table 25: Number of Borrowers in Social Security Offset due to Defaulted Federal Student Loans, by Benefit Type and
Borrower Age, Fiscal Years 2001 to 2015
Fiscal Year
Age of borrower at time of initial offset
Under 50
50-64
Over 65
Type of Social
Security
benefit
Type of Social
Security
benefit
Type of Social
Security
benefit
Disability
benefit
Retirement or
survivors’ benefit
Disability
benefit
Retirement or
survivors’ benefit
Disability
benefit
Retirement or
survivors’ benefit
2001
1,599
108
1575
1,413
0
954
2002
14,221
477
12,575
2,305
0
5,977
2003
13,046
514
11,985
2,506
8
5,834
2004
14,745
543
13,670
2,881
33
6,456
2005
16,914
568
16,213
3,402
118
7,553
2006
18,491
596
18,274
3,535
187
8,345
2007
21,590
655
22,395
4,129
347
10,553
2008
26,373
763
27,954
4,807
520
12,756
2009
31,853
870
33,255
6,074
731
15,451
2010
34,585
1,021
35,562
7,605
823
16,654
2011
38,678
1,141
40,250
9,306
824
18,804
2012
45,133
1,299
47,570
10,777
1,186
23,492
2013
54,166
1,484
58,804
12,593
1,764
29,998
2014
56,614
1,593
61,236
14,027
1,792
34,209
2015
57,180
1,663
60,401
15,084
1,778
36,471
Total distinct
borrowers, any
year
186,512
5,900
168,339
50,349
2,524
64,197
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Fiscal year 2001 numbers reflect a partial year because Social Security benefit offset began in
mid-2001. Borrowers receiving a disability benefit at the time of their initial offset may later age into
retirement benefits at their full retirement age, currently age 66 for people born in 1943-1954. Table
excludes 33 borrowers for whom a Social Security benefit type could not be determined.
Appendix III: Supplemental Data Analysis
Tables for Older Americans with Student Loan
Debt
Page 74 GAO-17-45 Social Security Offsets
Table 26: Age at Loan Origination For Student Loans Held at Time of Initial Social Security Offset, Fiscal Years 2001 to 2015
Age at loan origination
Share of borrowers
under 35 at time of
initial offset
Share of borrowers
35-49
Share of borrowers
50-64
Share of borrowers
65 and older
Less than 20
34.24
13.20
2.13
0.17
20-24
40.51
23.88
6.05
1.22
25-29
23.11
22.47
9.71
2.10
30-34
2.14
19.33
14.26
3.64
35-39
.
13.23
16.82
7.27
40-44
.
7.09
18.10
13.55
45-49
.
0.80
17.19
19.29
50-54
.
.
10.80
19.71
55-59
.
.
4.57
17.04
60-64
.
.
0.37
10.23
65 and older
.
.
.
5.77
Number of borrowers in
age group:
38,416
151,922
216,632
66,000
Source: GAO analysis of data from the Department of Education, the Department of the Treasury, and the Social Security Administration. | GAO-17-45
Note: Table excludes 4,884 borrowers for whom it was not possible to determine their age at the time
of loan origination for loans that became subject to offset. Dashes indicate categories not applicable
to an age group.
Appendix IV: Copy of Education’s Total and
Permanent Disability Servicer’s Form for
Annual Income Verification96F
Page 75 GAO-17-45 Social Security Offsets
1
Education proposed a revised version of this form that was approved by the Office of Management and
Budget on Sept. 30, 2016. However, Education officials said in October 2016 that the revised form
would not be implemented for several months. The revised form also does not explicitly state that the
loan will be reinstated if the borrower does not return the annual income verification form—even if they
have no earnings—to document that their earnings from employment are below the poverty guideline
for a family of two in their state.
Appendix IV: Copy of Education’s Total and
Permanent Disability Servicer’s Form for
Annual Income Verification
1
Appendix IV: Copy of Education’s Total and
Permanent Disability Servicer’s Form for
Annual Income Verification96F
Page 76 GAO-17-45 Social Security Offsets
Appendix IV: Copy of Education’s Total and
Permanent Disability Servicer’s Form for
Annual Income Verification96F
Page 77 GAO-17-45 Social Security Offsets
Appendix V: Comments from the Department
of Education
Page 78 GAO-17-45 Social Security Offsets
Appendix V: Comments from the Department
of Education
Appendix V: Comments from the Department
of Education
Page 79 GAO-17-45 Social Security Offsets
Appendix V: Comments from the Department
of Education
Page 80 GAO-17-45 Social Security Offsets
Appendix VI: Comments from the Social
Security Administration
Page 81 GAO-17-45 Social Security Offsets
Appendix VI: Comments from the Social
Security Administration
Appendix VII: GAO Contact and Staff
Acknowledgments
Page 82 GAO-17-45 Social Security Offsets
In addition to the contact named above, Michael Collins (Assistant
Director), Sharon Hermes (Analyst in Charge), Christopher Zbrozek, and
John Mingus made key contributions to this report.
Also contributing to this report were Deborah Bland, Ben Bolitzer, Helen
Desaulniers, Charles Jeszeck, Theresa Lo, Ying Long, Sheila McCoy,
Kevin Metcalfe, Mimi Nguyen, Dae Park, Kenneth Rupar, Kathleen van
Gelder, Walter Vance, and Adam Wendel.
Appendix VII: GAO Contact and Staff
Acknowledgments
GAO Contact
Staff
Acknowledgments
(100321)
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