If you're retired and owe student loans, your Social Security benefits might not be as big as you thought. More and more retirees who are in student loan default are seeing a chunk of their monthly Social Security checks being grabbed by the federal government. Since January, the feds have shrunk the size of around 115,000 retirees' checks, nearly twice as many as in 2011, reports MarketWatch, picking up on a report in SmartMoney. The amount of money withheld varies, but it can reach up to 15%.
“This is going to catch an awful lot of people off guard and wreak havoc on their financial lives,” says one financial planner. In many cases, the affected retirees are in debt not for themselves but because they helped pay for their children's college loans, note consumer advocates. The government does give two offers to debtors to set up a payment plan before the cuts kick in, and they will not touch checks of $750 or less. (Read more Social Security stories.)