Social Security Garnished Student Loans 2023 Latest Updates
With the news of student loan debt topping the chart with so many different penalties put in place for defaulters, it is vital that you learn ways to avoid social security garnished student loans and also how they came about. This also includes garnishing of your social security benefits Let’s dive in!
Overview of Social Security Garnished Student Loans
This is when a borrower defaults on their feder24bottlesclima corinne abbigliamento sexy mandarinaducksaldi and-camicie ynotsaldi borsalamilanesa benettonoutlet legioiedigea fracominaoutlet senzamai ynotoutlet ovyescarpe fracominaoutlet pasante kondom harmonte-blaineal student loan, the government can garnish their Social Security benefits, wages, and tax refunds to get their money back.
With it, borrowers have the right to mitigate or avoid these consequences by taking certain steps, including; if they’re disabled, filing for a disability discharge.
However, borrower advocates have complained for years that a lack of information from the government and the companies and nonprofit organizations it hires to manage the student loan program has meant struggling borrowers.
In 2015, the government garnished the Social Security benefits of nearly 114,000 borrowers over 50.
Of those, more than half were receiving Social Security disability benefits, not Social Security retirement benefits, according to a 2016 report from the Government Accountability Office.
How Social Security Garnished for Student Loans Works
When you fail to make a student loan payment for 270 days, then your loan is considered to be in default.
Then an agency decides to garnish your Social Security benefits, the first $750 of your monthly Social Security payment ($9,000 annually) is off-limits to garnishment.
However, the government can garnish up to 15% of your total Social Security income, which can result in a significant loss of income for those who depend solely upon Social Security.
To make matters worse, outdated policies set the Social Security garnishment limit below the poverty limit. The last time it was adjusted was in 1998; obviously, the cost of living has increased since then, and the poverty line has gone up.
Today, the poverty threshold for one adult is $990 per month. Since the government can garnish Social Security benefits all the way down to $750.
Thus, this can force people with no other revenue streams to subsist on an income that is $240 below the national poverty line. And it doesn’t matter how long ago you were in school.
How to Prevent or Relief from Social Security Garnishment
While you cannot appeal to reduce the amount of the debt, you can go to the agency that levied the garnishment and seek relief.
Your best bet to avoid the threat of garnishment is to act as soon as you realize you’re having trouble paying your debt.
Below are some of the more important methods for reducing or preventing Social Security garnishments.
1. Make a Payment Arrangement
Once you make an arrangement with the appropriate agency to repay your debt, the Social Security garnishment is released. In some cases, you may be able to negotiate a settlement.
2. Apply for a Disability Waiver
Older Americans on permanent disability may be eligible for a full discharge of their student loans. Borrowers with long-term medical conditions can also qualify for full Social Security payments.
Though the process can be tedious (you will need to document it annually), statistics have shown that more than one-third of people in default were able to pay off or cancel their debt with this option.
One caveat: The amount forgiven is considered income and you will likely owe taxes.
3. Apply for Financial Hardship
You may request a reduction or suspension of the garnishment of your Social Security because of financial hardship.
It is up to the Department of Education whether they will grant it. You can call the Department of Education to request a suspension, then follow up with the documentation needed for them to review.
4. Consolidate your Loan
You could get out of default by converting your defaulted federal loan into a federal consolidation loan.
You then have the option of doing an income-based repayment plan, which can make the payments more manageable and could reduce them to less than what is taken from Social Security.
5. Rehab your Loan
People in default can “rehabilitate” loans by working out a payment plan with the Department of Education.
This also doesn’t erase your debt, but depending on; your income, your monthly payment under a loan rehabilitation agreement could be as low as $5.
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Ways to Avoiding Student Loan Difficulties
Fortunately, there are some constructive steps you can take both before and after you take out or co-sign for a student loan. They are;
1. Hold Honest Discussions Before You Borrow
Before co-signing for a loan, talk with your co-borrower to determine how much you’ll need to borrow and agree on a realistic timetable for making payments.
Discuss how scholarships, less expensive colleges, or other options might ease the debt burden.
2. Prepare a Contingency Plan
Also before you commit, make sure you could afford to cover the loan payments yourself if your co-borrower is unable to.
If other family members offer a safety net, see if they’ll put that promise in writing, just in case they forget.
3. Monitor the Loan
After you borrow, be sure the loan servicer furnishes regular statements that show the balance due, payments made, the interest rate, and the payoff date.
File a complaint with the CFPB if you do not receive this information on a timely basis or if you’re unduly bombarded with harassing calls or letters.
4. Know Your Repayment Options
Deferment and forbearance programs can let you temporarily stop making payments if you experience hard times, such as difficulty feeding your family or paying other household bills.
Consolidating multiple student loans may result in smaller payments.
There are also other repayment options that might help, including income-based repayment (IBR), income-contingent repayment (ICR), pay-as-you-earn (PAYE), and revised pay-as-you-earn (REPAYE).
Some programs forgive an existing balance after 20 years, or if you pass away.
5. Understand the Social Security Rules
While up to 15% of your Social Security payments can be garnished to repay a student loan debt, your monthly benefit cannot sink below $750.
Furthermore, the garnishment cannot occur until two years after you default on a loan. Thus, giving you ample time to contact the loan servicer to modify the repayment plan.
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The Bottom Line
There is always a way out. Finally, absent relief from the federal government or your ability to withstand garnishment, the main solution is bankruptcy.
This should be considered as a last resort and only after all other options have been considered.
It should be noted that it can be more difficult to wipe out student debt with bankruptcy. Then it is to absolve other kinds of debt because it is a federal loan.
Hopefully, this article has provided some useful information to help prevent you from having your Social Security benefits garnished. Kindly share this link and subscribe to this page for more updates on related works.