Sometimes life happens, and we can't pay back the debts that we intended on paying. If left unchecked, defaulted debts especially defaulted student loan debt, can lead to financial ruin. Your credit will take a hit. You'll be at risk of a wage garnishment, tax refund offset, and lawsuits. But what about Social Security?
Can a creditor take your Social Security benefits to collect a delinquent debt?
Types of Social Security Benefits
The federal government offers Americans two types of Social Security benefits:
- Social Security Disability Insurance
- Supplemental Security Income
SSDI offers benefits to people who are disabled and have a qualifying work history, either through their own employment or a family member (spouse or parent).
SSI provides basic financial assistance to older Americans and people with disabilities who have limited income and financial resources.
SSDI is based on disability and work credits. SSI is based on limited income and resources, and age or disability.
The maximum SSDI monthly benefit payment is ~$3 thousand. The maximum monthly SSI payment is only ~$800.
Can SSDI Benefits be garnished?
The federal government can garnish Social Security Disability Insurance benefits for:
- delinquent federal tax debt
- defaulted federal student loans
- child support payments
- alimony
- court-ordered Victims Restitution
Other non-government creditors and debt collectors can't seize your SSDI Benefits as long as you receive them via direct deposit. Likewise, if you get your benefits on a prepaid card, your funds are generally safe.
This means your Social Security Disability benefits cannot be garnished for medical bills. Similarly, your monthly benefits are safe from credit card companies, personal loans, auto loans, mortgages, etc.
Even if a debt collector gets a court judgment against you, they cannot levy your bank account or send a garnishment order to take your Social Security money.
Do I have to pay student loans if I am on Social Security?
You have to pay your federal student loans even if you receive Social Security Benefits. You are entitled to monthly payments based on your income. If your sole source of funds is your Social Security retirement benefits, then your monthly payment will be based on the portion of your retirement income for which you have to pay taxes.
Can SSI be garnished for student loans?
SSI payments cannot be garnished or levied to repay student loans, government debts, or debts with collection agencies.
Can Social Security be garnished for student loans?
Social Security benefits can be garnished by the federal government for federal student loans that are in default.
In addition to garnishing your Social Security checks, the Department of Education and its debt collectors can also offset your tax refund and garnish your wages.
However, they cannot take money from your bank account for a defaulted student loan — at least not without getting a court order first.
How much of your Social Security Benefits can be garnished for student loans?
The Department of Education can garnish the lesser of:
- 15% of a Social Security recipient's monthly Social Security payment offset or
- the amount by which their monthly payment exceeds $750.
Here's an example of how this works.
Let's say you're an older American. The Social Security Administration sends you $850 a month for your disability payment. The amount that can be garnished is the lesser of $127.50 (15% of $850) or $100 (the amount by which $850 exceeds $850). In this example, $100 will be taken from your Social Security check to repay your defaulted student loans.
Here's one more example. Let's say your monthly Social Security income is $1250. The offset amount is the lesser of $187.50 (15% of $1250) or $500 (the amount by which $1250 exceeds 750). In this example, $187.50 will be taken from your check to repay your federal student debt.
Can the garnishment of Social Security benefits be reduced for hardship?
Depending on your personal finances, you can ask the Department of Education to grant you a full or partial reduction of your garnishment based on financial hardship.
To request a reduction, you typically have to submit:
- a completed Statement of Financial Status;
- proof of household income and expenses (living expenses, medical bills, credit card debt, etc.)
- a copy of the notification of offset (you can get this from the Treasury Department's Bureau of the Fiscal Service)
It usually takes about 6-8 weeks to get a decision.
In my experience, it's usually much easier to lower a benefit offset than it is to get back an income tax refund offset for student loan debt.
How to stop Social Security garnishment for student loans
You can stop a Social Security garnishment by getting your federal student loans out of default. Here are four options to bring your loans back into good standing:
- negotiating a federal student loan settlement
- applying for loan consolidation
- entering into a loan rehabilitation program
If you can prove undue hardship, bankruptcy may also be an option.
Can private student loans garnish Social Security?
Private student loans cannot garnish your Social Security Disability benefits for a defaulted loan. Nor can they garnish your SSI Benefits.
Is it true that there's no medicare until student loans are paid off?
You can receive Medicare even if you haven't yet paid off your student loans. Your eligibility for Medicare is not tied to your financial obligations for education debt.
Can the federal government withhold VA disability compensation for federal student loans?
The government cannot withhold money from your VA disability compensation to repay defaulted student loans. Veterans benefits under Part C of the Black Lung Act and tier 2 Railroad Retirement Benefits are exempt from garnishment.
Loan forgiveness for retirees and the elderly
Unfortunately, there are no specific student loan forgiveness programs for retired or elderly Americans.
The best options for forgiveness are for student loan borrowers who make 20 to 25 years of payments under an income-driven repayment plan or work for a qualified public service employer.
Other than that, your federal student loans will follow you to the grave.
Want to protect your Social Security from student loan debt? Let's talk.
For many disabled and retired people, 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. For years, I've helped people just like you get out of default to protect their money.
Schedule a free 10-minute call with me today. We'll work together to determine the best strategy to deal with your student loans and protect your Social Security money.
