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.
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.
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