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Dec. 8, 2005

Social Security and Defaulted Student Loans

The federal government can withhold money from Social Security payments to a borrower who has been in default on student loans for a decade or more, the U.S. Supreme Court ruled unanimously on Wednesday.

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The ruling in Lockhart v. United States (04-881) involved James Lockhart, a Washington State man who by 2002 owed more than $80,000 from nine student loans that he had failed to repay. When the Treasury Department began dipping into his monthly Social Security checks to collect, he sued, citing a clause in the 1982 Debt Collection Act that applied a 10-year statute of limitations on the government’s ability to collect on student loan debt in that way.

But in Justice Sandra Day O’Connor’s opinion Wednesday, the Supreme Court concluded that two subsequent laws — the 1991 technical amendments to the Higher Education Act and the Debt Collection Improvement Act of 1996 — combined to clear the way for such action by the government.

The 1996 law allowed the government to “offset” Social Security payments to collect on borrowers’ debts, the court found, and the 1991 changes in the Higher Education Act removed the 10-year statute of limitations. Taken together, Congress’s adoption of the two laws made the government’s action legal.

O’Connor’s opinion upheld an earlier decision by the U.S. Court of Appeals for the Ninth Circuit, which in turn had conflicted with a ruling by the U.S. Court of Appeals for the Eighth Circuit in a case known as Spellings v. Lee.

— Doug Lederman

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Comments

This law is WRONG! WRONG! WRONG! I ended up on SSDI as a result of a work related injury that took away my ability to enjoy my college education. Now, I’m stuck on a $750.00 a month gov’t check, unable to pay my student loans back, which have now been in default for 15 years. Meanwhile, even though the Dept. Of ED. has attached my SSDI to take$100.00 a month of my measly $750.00, the interest on those loans continues to incur,which is now 3 times the amount of the actual total of the loans. Tax rebates are non-existent, and the gov’t has me in a loop hole which is totally unfair. People do not go on SSDI just because they don’t want to work...that too is a difficult gov’t process.

Sharon W., at 10:50 am EDT on August 27, 2008

garnishing social security to repay student loans

I am a lady in her late sixties. I took out student loans in the amt. of $3000 19 yrs ago, the school unexpectedly dropped my course so I dropped out in the 3rd semester, and never got the third payment,contested it but never was given copy of any check proving I got it, but still am being charged for it. So I owe $5000 in loans. Additionally, they are charging me around $10000 for fees and interest, saying I owe $16,000. I am on a low fixed income that is not social security, and that they can’t touch, but they are going to ruin my credit and this continues to hang over me. I have always been too poor to pay it and wouldn’t mind paying the loan amt. of $3000, but not all this extra they are trying to make off of me. School never helped me; it was wrong to drop my program without warning, but nothing was ever done except to haunt my life with this student loan thing. How much of the amt. owed in the above court case was the actual Loan Amount?? They make him sound like a con artist, maybe he was, but maybe alot of that was interest and so called ‘fees’ and errors he couldn’t prove. This is a dangerous law that causes desperate poverty for alot of people. Those who crow about how good it is speak from an insulated upper middle class position. Try and live on what alot of people on ssi and ss have to, or on what I live on, and then you won’t be crowing about public faith, ect. As for the public, they know what’s up.

natalie, at 1:30 pm EDT on October 24, 2008

Garnishing SSDI

I read an article on Consumer Affairs.com that quoted the Higher Ed changes. It stated that those with disabilities are exempt. So how then do we convince the Dept. of Tres and Dept. of Ed that we are exempt due to our disabiliy?

Pamela, at 7:40 pm EST on November 25, 2008

Student Loans

The high court’s action to uphold action to use social security income to repay delinquent loans is good news for students, taxpayers, and higher education.

The ability of students to get government loads is contingent on public support for those loan programs. Public support is strengthened when citizens perceive that the government has both the desire and the legal power to collect delinquent loans.

A less-apparent virtue of the court’s ruling is that students may be a bit more careful about taking government loans to pay for college courses that offer little in way of future income.

Marvin McConoughey, at 12:34 pm EST on December 14, 2005

student loans fruad 20 years later

Yes but unlimiting the student loan collectiosn ahs menat that 20 years later people like us get hit with a collection for a loan we never took out. And then it is a nightmare. We never took it but the colections is not only for the loan amoun but also 20 years of interest. There are no original apapers to send to investigation. And the ed dept is goin all out to collect a loan that we never took out. They palce it on your credit report adn pretty much detroy your life , credit collections, etc and not to mention the hours adn hours we have to pay lawyers to defend us. I totally disagree with them being allowed to have a fruadulant loan and not notify us until after 20 years and then try to collect form us when we have no originals or anything of docs to defend ourselves with. I have talked to others in same boat. Starting to feel like there is a real issue here. Why did they wait 20 years to even notify us? Seesm liek a real racket to me.

cher, at 12:05 pm EDT on August 31, 2006

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