Did you know that your Social Security can be reduced because someone else owes money to the Federal government? No, I’m not talking about someone not paying their fair share of Social Security withholding and the system going broke. You might have your Social Security reduced because of someone else’s student loans.
If you ever cosigned a student loan for someone else, such as a child or grandchild, then you are responsible for that loan. In most circumstances, the Federal government will not ask you to pay. However, when you are ready to collect Social Security, your monthly check might be reduced by up to 15%. It happened to 115,000 Americans on August 6, 2012.
The bottom line is that you should not rely on Social Security as your sole retirement plan. If that is not possible for you, then be careful about cosigning for student loans. Everyone should talk to an estate planning attorney about how they can make sure they have enough money to retire on. The attorney can help you make reasonable plans, even if your relatives decide not to pay back their student loans on time.
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