Social Security update: Why millions of retirees could see $300 cuts to retirement checks

Outstanding student loan debt could significantly cut the amount retirees receive in their Social Security checks.

Retirees may have part of their Social Security checks withheld by the government in order to pay off their outstanding student debts. This significantly imperils retirees, who, unlike younger workers, have no way to pay off the debts otherwise, a report from the New School's Schwartz Center for Economic Policy Analysis found.

"Older debtors lack the characteristics of younger debtors — more 'prime-aged' working years left [to earn a salary], more time to save for retirement — making it harder for them to attain the promised 'returns' on their investment," according to the report.

"These older workers face the dual effects of both indebtedness and lack of enhanced earning power, making them especially precarious," it added.

The age of recipients at the time of retirement, the amount paid into Social Security, and the number of years paid into Social Security all affect the maximum payment retirees receive. The average received is $1,907 a month, meaning the 15% withheld to pay off student debts would be $286.

Even worse, the report found that 14.9% of workers over the age of 55 have not completed the degree for which they took out loans, stripping them of the benefits for which they took out the loan in the first place.

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Social Security is financed through a payroll tax paid by employers and employees.

Social Security payment amounts are set to shrink unless Congress takes some action to prevent it. Analysts estimate the SSA will no longer be able to give out full payments to recipients as early as 2034 due to a rising number of retirees and a shrinking number of workers.