Thursday, June 16, 2022

Can Student Loans Be Taken From Social Security

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Can They Take My Entire Monthly Check

Can Student Loans Garnish My Social Security?

No. There are two important limits:

  • First step: the government can never take more than 15% of your regular check amount. But then theres another limit that might reduce what is taken to less than 15%.
  • Second step: The government must leave you least $750 per month . Even if this means the government has to take less than 15%. You must always have at least $750 per month after whatever the government takes for debt repayment.

Is There Anything I Can Do To Fight Back

Yes. You are supposed to get a number of notices warning you that your benefits are going to be taken. These are called notices of offset. Once you get one of these notices, you have the right to a hearing with the agency that is collecting the money.

For example, if you owe money on a student loan, your hearing will be with the Department of Education. You have the right to challenge the amount of money taken , including the right to request a reduction of the amount to be offset. You also have the right to set up a repayment plan to avoid having larger portions of your benefits taken.

After you get notices from the agency that is collecting the money, you will receive a notice from the Department of the Treasury Financial Management Service. This is the agency that will actually take the money out of your benefits. Their number is 304-3107.

Can The Government Take Your 401k For Student Loans

The federal government cannot seize or garnish your 401 assets for student loan debt thatâs in default. The Employment Retirement Income Security Act of 1974 protects the funds in your 401 because the money only legally belongs to you once you withdraw it as income. Until then, the funds are the property of the plan administrator â your employer.

Note: The one exception to the ERISA protection is federal tax liens. The IRS can seize or attach the funds in your 401 if you fail to pay back taxes.

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What To Do If The Government Garnishes Your Social Security Because Of Student Loans

For retirees, there are protections in place to help keep your Social Security and VA benefits secure. However, if you default on federal student loans, those protections might not help. The government can take money directly from your wages , Social Security payments, and tax returns. And unlike private creditors, the federal government doesnt need to sue you and get a court order to start.

Perhaps its not much consolation, but youre not alone if youre struggling with Social Security garnishment due to student loans. In 2017, the Consumer Financial Protection Bureau reported that from 2005 to 2015, there was an increase from about 8,700 to 40,000 borrowers who are in the same situation.

Social Security benefit garnishment can be especially difficult for the many people who rely on this income to live. Fortunately, you have a few options that could help restore your full Social Security benefits.

Supplemental Security Income Is Untouchable

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Supplemental Security Income is a Federal income supplement program funded by general tax revenues . It is designed to help aged, blind, and disabled people, who have little or no income, and provides cash to meet basic needs for food, clothing, and shelter.

SSI benefits also are payable to people 65 and older without disabilities who meet the financial limits. The reason I mention it in this article is that Supplemental Security Income cannot be garnished under any circumstance, including student loans in default.

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I Am A Senior With Student Loan Debts What Help Can I Receive

Many seniors are in default on student loans. These loans may have been taken out for them or others. Either way, Social Security is offsetting the benefits of social security retirees and disabled seniors with these debts.

Before offset begins, Social Security sends a notice. Debtors should know that the notices they receive from Social Security are just to tell them that offset will begin. Debtors cannot appeal, challenge, change, or question this debt to Social Security. To do this, they must go back to the agency to which the debt is owed. The notices from Social Security will have the name and contact information for the agency that is claiming the debt is owed. To change or challenge the offset, the debtor will have to set up a payment plan, or argue hardship to the agency that is owed the money.

Debtors can avoid or stop an offset by getting the student loan out of default. Income Based Repayment is an option. It gives borrowers a way to make loan payments. IBR provides for reasonable student loan payments based on a person”s income. Payments can be as low as $0. After 25 years on the program, any remaining debt is forgiven. People with loans in default cannot be in the program. However, people can get their loans out of default by making a number of “reasonable” payments. Once the loan is out of default, offset of benefits should stop.

Are There Different Rules For Student Loans

Yes, you may have other rights when dealing with student loan debt. May may be able to cancel your student loan debt, or sign up for an affordable payment plan. You should get legal help to find out more about these options.

You can also learn a lot by looking at the U.S. Department of Education web site or by calling the Departments Student Aid Office at 1-800-4FED- AID.

In addition, there is a Federal Student Aid Ombudsman Group of the U.S. Department of Education that will help you once you have tried other options. The toll-free phone number is 877-557-2575.

This article is based on information from the National Consumer Law Center. It was reviewed and updated by Legal Aid of West Virginia in 2015.

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Aug Can My Social Security Payment Be Taken To Pay My Student Loans

Surprisingly, yes! Several years ago, Congress passed legislation allowing up to 25% of a social security check to be taken to re-pay student loans. This includes accrued interest on the loan and will continue for as long as it takes to re-pay them.

Student loans dont go away there is no statute of limitations on their enforcement and little relief from having to pay them, unless you become completely disabled. That includes interest on the loans as well, which can accumulate at staggering amounts. In fact, as noted by fellow BLN member, Carmen Deluttri, enforcement of these loans often becomes predatory.

The scariest part of this for many people is that the loan can be ignored for years, and then when the social security checks start coming, there is a deduction for loan repayment! If youve worked all your life towards retirement, social security isnt much to begin with. Having it reduced to pay an ancient debt can be devastating.

Fortunately, there is some relief. If you can show complete disability the loans will go away. If you can show that paying them will be cause an undue hardship, they can be discharged in bankruptcy.

Social Security Administration Documentation

Social Security garnished after student loan defaults

If you’re eligible for Social Security Disability Insurance or Supplemental Security income, you can qualify for TPD forgiveness by providing documentation from the Social Security Administration that your next scheduled disability review is five to seven years or more from your last disability determination.

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How Much Of Social Security Can Be Garnished And When

It is possible for up to 15 percent of your Social Security to be garnished or offset for past-due student loans. The loan servicer must give you 30 days notice before they can garnish your wages. If you have already received that notice, then you have a limited time to act.

However, you have options that can help you avoid garnishment. Your best option may be to enter a repayment plan with the lender.

Want To Protect Your Social Security From Student Loan Debt Lets Talk

For many older Americans, the money they get in federal benefits is the only money they get each month. Protecting your Social Security from student loan garnishment is paramount. Over the years, Iâve helped hundreds of Social Security recipients like you get out of default to protect their money.

Schedule a free 10-minute call with me today. Weâll work together to determine the best strategy to deal with defaulted student loans and protect your Social Security money.

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Before You Sign Or Co

  • How to File for Student Loan Bankruptcy
  • According to the Consumer Financial Protection Bureau , the number of student loan borrowers age 60 and older climbed at least 20% between 2012 and 2017. Furthermore, more than 75% of states saw at least a 50% uptick in outstanding student loan debt. Taken together, these two figures suggest a disturbing trend that could mean economic hardship for millions of older Americans in the years ahead if they’re stuck with loan repayment after retirement.

    How Does The Loan Get Paid Off With $0 Payments

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    If you are making $0 per month payments, the loan balance will only grow. Though unfortunate, it is the only option for many senior citizens on the fixed income of social security.

    There are provisions to have the loans forgiven after 25 years, but the reality for many seniors is that they will certify their income yearly and never make any payments on the loan.

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    Suspension Of Collection Activities During The Application Process

    If you notify the Department that you plan on applying for a disability discharge, the Department will tell your loan holders to suspend collection activity for up to 120 days. So, you won’t have to make payments for up to 120 days, which gives you time to complete and submit the discharge application. After you submit your application, the Department will contact your loan holders and tell them to suspend collection activity on your loans for, again, up to 120 days.

    The suspensions don’t apply to wage garnishments or Treasury offsets, however. But if the Department approves your request for a discharge, the wage garnishments or tax offsets will be discontinued.

    Your Social Security Will Be Seized If You Owe Student Loans

    The Treasury Department’s right of set-off enables benefit garnishment, but the proposed 2016 budget contains an increase in exempt funds.

    NEW YORK Social Security benefits are bullet proof. You can’t lose them, no one can take them away.

    Except the federal government.

    “It used to be against the law to garnish Social Security benefits to pay debts,” said Maggie Thompson, campaign manager for the Higher Ed, Not Debt initiative at theCenter of American Progress. “Thats because Social Security is an earned benefit and a backstop against poverty.

    But Thompson points to a 1996 law that changed all that. Hundreds of thousands of seniors are having huge chunks taken out of their checks to pay their students loans from the Department of Education ,” she says. Those loans run the gamut from co-signed obligations used to fund the education of children and grandchildren or–increasingly–to pay for their own forays into higher ed.

    Borrowers run the gamut also, from seniors who took a swing at second careers through vocational courses at for-profit colleges to grad school lifers stuck in the all-but-dissertation straightjacket. Taken together, they compromise a significant number of Social Security recipientsand people with student loans.

    Higher Ed, Not Debt says that the same law, the Debt Collection Improvement Act, gives the Department of Education the option to remove or withhold a garnishment order.

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    Student Loans And Social Security Payments: Bottom Line

    As 2021 began, Americans owed $1.64 trillion in student loan debt. Of those 45 million Americans with outstanding student loan debt, some are heading into retirement and hoping to rely on Social Security benefits to live.

    To protect yourself, you should do everything you can now to avoid student loan default. The choices you make today could affect you for years to come. If your financial situation feels impossible, it may make sense to explore the option to discharge your student loans through bankruptcy.

    Whatever your age and situation, there are options to help you manage your student loans and get out from under the shadow of debt.

    Over 323000 Federal Student Loan Borrowers To Receive $58 Billion In Automatic Total And Permanent Disability Discharges

    Seniors Seeing Student Loan Payments Taken Out Of Social Security Checks


    Over 323,000 borrowers who have a total and permanent disability will receive more than $5.8 billion in automatic student loan discharges due to a new regulation announced today by the U.S. Department of Education. The change will apply to borrowers who are identified through an existing data match with the Social Security Administration . It will begin with the September quarterly match with SSA. The Department is also announcing two other policy items related to TPD today. First, the Department will indefinitely extend the policy announced in March to stop asking these borrowers to provide information on their earnings a process that results in the reinstatement of loans if and when borrowers do not respondbeyond the end of the national emergency. Second, the Department will then pursue the elimination of the three-year monitoring period required under current regulations during the negotiated rulemaking that will begin in October.

    The Department will take short- and long-term steps to address these reinstatement concerns. First, the Department will indefinitely stop sending automatic requests for earnings information even after the national emergency ends. This continues a practice that the Department announced in March 2021 for the duration of the national emergency. Next, the Department will propose eliminating the monitoring period entirely in the upcoming negotiated rulemaking that will begin in October.

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    Senators Say: Stop Siphoning Off Social Security Benefits To Repay Student Debt

    Social Security benefits for tens of thousands of older and disabled Americans are being cut to below the poverty line to recover student loan debt. A group of senators including Elizabeth Warren and Bernie Sanders are trying to change that. They have introduced a bill that would prohibit the government from garnishing Social Security disability and retirement payments to pay off these old debts. Senator Warren, in a news release on her website, said, “The hard-earned Social Security checks that are the sole source of income for millions of seniors should not be siphoned off to pay interest and fees on student loan debt.

    This is the second time the Senate has tried to change the way the government collects on student loans. A similar bill was introduced in 2015 but failed to pass. In the current strongly partisan environment in Washington, no one believes passage of this bill will be any easier this time around.

    Its a challenge, Senator Sherrod Brown , a co-sponsor of the new bill, told MarketWatch . Senators and House members are hearing about this problem more and more. Were hearing all kinds of people calling us surprised that can do this.

    The number of those with unpaid student loans who are facing garnishment has jumped dramatically in recent years. According to a December report from the Government Accountability Office between 2002 and 2015 those in this predicament has increased nearly 400%.

    How Do I Know If My Loans Have Been Forgiven

    If the Department of Education determines that you qualify for a TPD discharge, you’ll receive a notification that your loans have been forgiven or your TEACH Grant service obligation does not need to be completed. You’ll also receive a refund of any loan payments you made on or after the effective date of your disability certification.

    If you qualify due to SSA documentation or a physician’s certification, note that you will be subject to a three-year monitoring period. If you don’t meet certain conditions at any time during this period, your loan or grant service obligation will be reinstated.

    Reinstatement may occur if any of the following happens during the three-year period:

    • Your annual earnings from employment exceed the poverty guideline amount for a family of two in your state.
    • You receive a new federal student loan under the direct loan program or a new TEACH Grant.
    • You get another disbursement from a direct loan or TEACH Grant that was first disbursed before your discharge, and you don’t return it within 120 days.
    • The SSA notifies the Department of Education that you’re no longer disabled or that your next scheduled disability review will no longer be five to seven years from your last determination.

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    If I Cant Pay My Student Loans Can The Lender Take My House

    • If I Cant Pay My Student Loans, Can The Lender Take My House?

    If you are worried about the consequences of not paying your student loans and are wondering if a lender can take your house as a result, the short answer is yes. However, this outcome is extremely unlikely, and it takes a long time to get to that point. The long answer is much more nuanced.

    Whats The Social Security Garnishment Limit

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    With the Debt Collection Improvement Act of 1996, the government allowed for garnishment of Social Security benefits but set a limit on how much can be offset. Per the act, the government cant take any more than 15% of your Social Security payments, nor can it leave you with less than $750 in monthly benefits.

    This limit doesnt give people enough protection, though. The last time the limit was adjusted was in 1998 the cost of living has increased since then, and the poverty line has gone up.

    Today, the poverty threshold for a one-person household for someone aged 65 and older is an annual income of $12,261, or about $1,022 a month. However, the government can whittle your Social Security benefits down to $750 a month, which comes out to an annual income of just $9,000. With these reduced Social Security payments, older Americans with no other revenue streams have to subsist off an income thats well below the national poverty line.

    Another piece of bad news: Most of the money carved from Social Security payments doesnt even pay down the loan principal. Of the $1.1 billion garnished from benefits as of 2016, more than 70% had gone to paying off fees and interest, rather than the borrowers actual debt.

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