by
Gary North
Tea Party Economist

Recently
by Gary North: Keynesianism
vs. the Gold Coin Standard

Retired parents or grandparents who helped their children get through
college by borrowing money, but who did not repay the money, are
now facing automatic deductions. The lenders go to Social Security.
The Social Security Administration then orders a monthly deduction
program. The money is automatically deducted and sent to the lender.

People thought
they could beat the system if the could just make it to retirement.
No such luck. The banks just get in line. They get paid first.

In 2012 so
far, 115,000 retirees have had their monthly payments reduced in
this way. This is almost twice the number of people hit in 2011,
and the year is not over yet. It was 60,000 in 2007. The number
will start rising fast as baby boomers retire.

How much money
does the SSA skim off? Up to 15%. For people who are dependent on
SS for their income, this is a big hit. They did not budget for
paying it back when they still were in the labor force. Now they
are retired.

Many of
these retirees arenÂ’t even in hock for their own educations.
Consumer advocates say that in the majority of the cases theyÂ’ve
seen, the borrowers went into debt later in life to help defray
education costs for their children or other dependents.

This was truly
dumb. They paid for part of their childrenÂ’s inflated college
tuition costs. None of this was necessary. The kids could have gotten
their degrees for under $15,000. Now the parents or grandparents
are trapped.

Harold Grodberg,
an elder law attorney in Bayonne, N.J., says heÂ’s worked
with at least six clients in the past two years whose problems
started with loans they signed up for to help pay for their grandchildrenÂ’s
tuition. Other attorneys say theyÂ’re working with older borrowers
who had signed up for the federal PLUS loan – a loan for
parents of undergraduates – to cover tuition costs.

The number
of these people will grow. Earlier this year, a total of 2.2 million
people 60 years old or older were still in hock for college loans.

Congress changed
the law in 1996 to allow Social Security to raid monthly checks
in advance. How many people know this? Not many. Now millions of
them are going to find out. Congress passed a law to that effect
even earlier: the Higher Education Technical Amendments Act. If
borrowers owe $60,000 or more, the time limit goes to 30 years.
Another eight years can be added on for borrowers facing unemployment
or other economic hardship; during those years, payments arenÂ’t
required but interest accrues.

Withholding
extends even to disability benefits.

Student loan
debt is a killer. Avoid it.

Continue
Reading related article on www.smartmoney.com

August
10, 2012

Gary
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 31-volume series, An
Economic Commentary on the Bible.