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Live: Social Security Checks Reduced for Student Loan Default
President Trump warned that as soon as this month social security checks could be garnished if you have defaulted on your student loans.
To garnish wages means to withhold them to pay off a debt, not that final flair on your culinary masterpiece.
People default on their loans typically if they miss their payments for an extended period of time, and more than 450,000 student loan borrowers over 62 are in default in the US.
Poor Grandma So What?
Firstly, take pity on Grandma. Show some class.
Student loans are not free money. Even if no one you know is affected by Social Security garnishing, your takeaway should be that many are still dealing with the burden of college expenses, even as they are nearing retirement age!
Student loans are better at following you than I am (jokes! I don't stalk. All my time goes into this wonderful newsletter), and the longer you ignore them, the worse it gets.
So you should really know...
Learn: How to Pay Off (Student) Loans
The process for paying off loans is similar no matter whether it's for tuition or a credit card, the most important thing is that you make your payments consistently.
Loans can be large, so having a consistent repayment process can transform a mountain into an achievable task. Here’s how to start:
Know what you owe. If it's a federal student loan, log on to studentaid.gov. If it's a different type of loan, typically you will use the loan provider's website/platform to figure out your outstanding balance.
Understand your repayment plan. Federal loans will often have a 6 month grace period before you have to start paying them off. Either way, figure out how much you will have to pay monthly.
Budget for it. These loans are a part of your finances, so build them into your budget. These payments shouldn't be something you put off until your social security gets garnished!
Automate your payments. It's best if you can make your financial processes effortless. This way they can handle themselves. Also, some loan servicers offer a small interest rate discount if you autopay!
You likely are still in college or don't have a lot of debts yet, but having a plan is valuable.
Knowing how you will handle debt rather than just letting it disrespect you can mean the difference between your sunny retirement villa and uncertainty about how your social security will cover groceries.
Leverage: Snowball vs. Avalanche Debt Repayment Strategies
If you ever have multiple outstanding debts (credit card, house, student loan, etc.) there are two main methods for starting to pay them off:
Snowball Method (Emotional Wins):
Pay off your smallest loan first, regardless of interest rate.
This is meant to build momentum and motivation.
The downside is that if you don't pay off your highest interest debt first then you may end up paying more on your loans over time.
Avalanche/Waterfall Method (Math Wins):
Pay off the highest-interest loan first.
Saves the most money long-term.
Downside is that sometimes it can take longer to feel progress, which can be discouraging.
The better option is the one that will get you paying off your loans the fastest, not necessarily the one that makes more mathematical sense.
Launch!
Federal student loans often give a six-month grace period after graduation before you need to start paying. If you have student loans, know this date. Acquaint yourself with it. Become it.
And then if you have any loans in general, come up with a repayment plan for it. Or at least figure out how much per month you will have to pay towards it.
Loans are a part of life. And they aren't all bad. You will probably need to borrow money to buy a house. Your student loan perhaps is paying for your prosperous career as an underwater basket weaver.
But paying them off is also a part of life, and having a plan for how will make it a lot easier ;).
Hey!
Thank you so much for being a part of this newsletter. I am grateful to write to you weekly and I hope this helps you feel more confident with your finances.
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Thank you for helping me (and your friend) out!
—Ben Brosnahan
