August 23, 2012

More Social Security Money Withheld Because of Unpaid Student Loans

About twice as many Social Security recipients are not receiving all of their Social Security payments this year because they have unpaid federal student loans, according to a report by SmartMoney.com.

According to a 1996 law, the federal government has the authority to withhold portions of Social Security payments if defaulted debt is owed to the government, including federal student loans.

“It’s quite extraordinary because normally Social Security benefits can’t be touched by creditors,” said Deanne Loonin, a staff attorney with the National Consumer Law Center.

From January through August 6 of this year, the government reduced the size of about 115,000 retirees’ Social Security checks, almost double the department’s enforcement in 2011, according to data from the Treasury Department. In 2007, there were 60,000 cases and in 2000, there were only six cases.

While the amount that the government withholds can vary, at least $750 a month must be left untouched.

“When you think about it, $750 a month is less than the poverty line. It’s not a lot of money for people to have,” said Loonin.

Loonin said she has worked with people who are often older and have their Social Security benefits withheld. They are delinquent on a range of loans, including those federal student loans parents took out for their children.

Many federal loans allow borrowers to request a reduction in loan payments or suspension based on hardship, such as total permanent disability.

The National Consumer Law Center in Boston has set up a website to assist borrowers to avoid default and to outline steps to take if they do default on a loan.

abcnews.go.com

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