More Social Security checks are docked for student debt

The student debt crisis isn't only affecting Americans right out of college.

Seniors are increasingly feeling the pain, with about 156,000 older Americans seeing their Social Security checks docked last year for delinquent student loans, according to an analysis of government data by CNNMoney. That represents a stratospheric climb from 2000, when only six people had their Social Security checks garnished for the same reason.

The development comes as baby boomers and seniors are among the fastest-growing group to rack up student loans. More than 2 million Americans over the age of 60 hold student debt, or more than double the number in 2005, according to data from the Federal Reserve Bank of New York. On top of that, delinquency rates for the over-60 crowd stands at 12.5 percent, more than three percentage points higher than graduates who are under 30 years old.

Some of those retirees with docked Social Security checks may be seniors who co-signed a loan for a child or grandchild and were left holding the bag, while others may have plunged into debt after going back to school later in life.

While banks and private creditors can't garnish seniors' Social Security payments, the government can dock the checks for repayment on certain types of debt, including federal student loans, according to BankRate.com.

Compounding the problem is the inflexibility of student loans. They're difficult to refinance, with some borrowers stuck with interest rates that are above 7 percent, even though rates on other types of debt are much lower. A bill sponsored by Senator Elizabeth Warren that would have allowed borrowers to refinance at lower rates was killed by the Senate earlier this year.

Even after entering bankruptcy, consumers can't always discharge their student loans, adding to the problem.

The bite out of the Social Security checks aren't small, either. Fifteen percent of a person's check can be taken by the government to pay back debts. That means a typical indebted senior may find $180 shaved off his $1200 monthly benefit.