Social Security benefits are exempt from just about all creditor collection efforts but, unfortunately not the U.S. Department of Education. In fact, current law provides that student loan borrowers who are 50 years old or older and have defaulted on their student loan debt are required to repay the student loan debt with a portion of their social security benefits.
A report issued earlier this month by the United States Government Accountability Office regarding social security offsets shows that thousands of older Americans Social Security benefits are being garnished to pay on defaulted student loans. Many have owed these loans for decades and are having up to 15 percent of the social security benefit withheld for repayment.
In 2015, the Department of Education collected almost $4.5 billion on defaulted student loan debt. About $171 million was collected through social security garnishments better known as administrative offsets. Out of the millions collected, about 71% goes toward interest and fees with only about 28% being paid toward loan principal. Even worse, many of the older Americans who endure these offsets are receiving benefits below the federal poverty guidelines. To add more insult to injury, the report found that the borrower’s subject to the offsets are charged a fifteen dollar offset fee.
On the bright side, there are a number of voluntary repayment options that a borrower may elect to avoid an administrative offset of their social security benefits. In addition, those borrowers who suffer from a total and permanent disability (TPD) may be eligible for a TPD discharge of the student loan debt if they comply with stringent annual documentation requirements. Failure to submit annual documentation to verify ongoing income can result in a loan that was initially approved for a Total and Permanent Disability discharge to be reinstated and offset of benefits will resume. You can read more about a disability discharge of student loans in a previous blog post by Mary Pool.
There are also a number of student loan repayment options available as I discussed here in a previous blog post.
Although student loan discharge in bankruptcy is rare and complicated, you can stop an administrative offset by filing a chapter 13 bankruptcy. If you are having a similar issue or suffering from any financial burdens, please contact our office nearest you to discuss your options with one of our experienced attorneys.
Amy K Tanner is a shareholder in several of the Bond & Botes Law Offices. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She focuses primarily on consumer bankruptcy law in the Huntsville and Decatur offices.Read her full bio here.