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Can Social Security be Garnished for Student Loan Debt?

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Beware: The government can take up to 15% of your Social Security income if you default on federal student loans. And although private lenders can’t garnish your Social Security benefits, they can sue if you fall behind on payments.

Here’s what you need to know about delinquent federal debt and how it may affect your Social Security payments.

Understanding student loan garnishment

If you default on your federal student loans, the government can target any of the following to garnish your funds:

  • Wages: The government can require your employer to withhold a portion of your paycheck to repay your student loan debt.
  • Tax refund: The IRS can seize your federal tax refund and apply it toward unpaid loans. Depending on your circumstances and type of loan, the IRS may also withhold your state tax refund.
  • Social security benefits: If you’re nearing retirement, the government can take up to 15% of your Social Security retirement or disability benefits. However, it can’t touch your Supplemental Security Income (the payments meant to cover basic necessities for those with low incomes).

Approximately 65 million Americans collect Social Security benefits to help fund their retirement, with many relying on this as their sole source of income. When the government takes a chunk of these much-needed benefits, it can significantly impact a retiree’s quality of life.

The shocking reality of student loan debt
Americans currently owe $1.75 trillion in combined student loan debt. Of those 48 million Americans with outstanding student loan debt, some are heading into retirement and hope to rely on Social Security benefits to live.

The Social Security garnishment limit

Under the Debt Collection Improvement Act of 1996, the government can garnish up to 15% of your Social Security payments, but it must leave you with at least $750 in monthly benefits.

Unfortunately, this limit might fall far short of the average person’s day-to-day essential needs. The government last adjusted the limit in 1998, and the cost of living has significantly increased since then, along with the poverty line.

Today, the poverty threshold for a one-person household for someone aged 65 and older is $13,590 a year — or about $1,133 a month. If the government whittles your Social Security benefits down to the minimum, you would need to survive on a mere $9,000 a year. Because of this, older Americans with no additional revenue streams may drop well below the national poverty line if the garnishment is severe.

Furthermore, most money subtracted from Social Security payments barely reduce the loan principal. Of the $1.1 billion garnished from benefits as of 2016, more than 70% went to fees and interest rather than the borrower’s actual debt.

How many Americans had their Social Security payments garnished?

Although very recent statistics aren’t available, 2015 data reported by the Government Accountability Office showed around 114,000 borrowers aged 50 and above had their Social Security payments garnished that year.

Wage garnishments are on the rise, too. According to a LendingTree study based on Department of Education numbers, wage garnishment is becoming increasingly common for student loan defaulters. That study examined data from July 2015 and September 2018 and found that debt collectors took $2.3 billion in wage garnishments.

Tips for getting out of student loan default

Unpaid federal loans are tough to get away from — unless the borrower is eligible for student loan forgiveness, can get a student loan discharge, or passes away. When you fail to make a student loan payment for 270 days, your loan defaults. The best approach is to repay your debt immediately — which, of course, is easier said than done.

When it comes to defaulting on student loans, you need to know your rights. For example, older Americans on permanent disability may be eligible for a full discharge of their student loans. Borrowers with long-term medical conditions may also qualify for full Social Security payments.

You may need to enter a rehabilitation program with the Department of Education. With a rehab program, you should be able to set up an income-based plan with manageable payments. Once you’ve made several on-time payments, you may qualify to consolidate your student loans.

Student loan consolidation can simplify your monthly payments while potentially saving you money on fees. Consolidating your loans is also another way to get them out of default.

If you have additional concerns about student loans and social security, consider contacting a free or low-cost financial counselor to discuss your specific circumstances.


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