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Student Loan Debt and Social Security Disability Benefits

Each year, millions of Americans struggle to pay their student loan bills.  This is true for younger people who are just out of college, and it is true for people who have been out of school for 20 years.  It is also true for parents of students who took out federal student loans and may still be struggling to pay them off many years later.

cashThis is reason we see Americans who have reached the age of retirement and are still saddled with tens of thousands of dollars of federal student loan debt.  While it is difficult for many people to pay off this debt and make their required payments each month, it is especially challenging for those who are disabled, according to a recent news article from the Money and Career Cheatsheet.While this should come as no surprise, what may be surprising is that if you are on disability and are receiving Social Security Disability Insurance benefits, the federal government has the power to garnish your monthly benefits checks if you are in default on your student loan payments for federal loans.  We make this distinction, because the government does not have the power to garnish disability benefits for the payment of private loans, such as the kind of loans that many obtained if they went to graduate school.

As our Boston disability attorneys are aware, the people who are getting their wages garnished are often far below the federal poverty level and the ones being hurt the most by this situation.  More than 50 percent of Social Security benefits recipients that are subject to monthly benefits garnishment related to the payment of student loan debt are earning less than $990 per month.  This has allowed the government to collect nearly $200 million in garnishments from Social Security beneficiaries who have defaulted on their student loan obligations.

To make matters worse, the way student loans are typically set up, the vast majority of payments go to the interest and hardly any is applied to the principal.  However, when the minimum payment is made via the garnishment, this is not typically enough to even match the rate at which interest is accruing, so the amount owed may be actually increasing each month.

One thing that makes this more of a fear than in the case of a private student loan, is that if a private lender holds you in default on your promissory note, that lender must make attempts to collect, then can eventually file a lawsuit against you for breach of contract. However, they are simply an unsecured creditor, and, once they get an order, they can have that order turned into a judgment. This can take a long time and you may have one or more defenses you can us to defeat having garnishment put on your Social Security disability benefits. On the other hand, the federal government may be able to send you a letter saying your wages will be garnished unless you arrange payment on a date determined by the agency.   If you fail to do so, they can often simply start the garnishment without the need to go to court in many cases.

If you or a loved one is seeking Social Security Disability Insurance in Boston, call for a free and confidential appointment at 1-888-367-2900.

Additional Resources:

Will You Lose Social Security Because of Student Loans?, January 8, 2017, By Megan Elliot, Money are Career Cheetsheet

More Bog Entries:

Social Security Disability Judges Allegedly Used Racial and Sexual Terms on Claimants’ Applications, July 27, 2016, Boston SSDI Lawyer Blog