Social Security Garnished Student Loans: The news of student loan debt is top of the chart, so many different penalties put in place for defaulters. This also includes garnishing of your social security benefits. So I will help you in highlighting ways to avoiding social security garnished student loan and also how it came about.
You should also consider that you have other options out there to avoid having this became a reality.
Recent data indicates that about 45 million Americansowe a total of $1.4 trillion in student loan debt; this is more than all the credit card debt, auto loan debt, and every other type of debt Americans hold with the exception of mortgages.
What is Social Security Garnished for Student Loans?
This is when a borrower defaults on their federal student loan, the government can garnishtheir Social Security benefits, wages and tax refunds to get its money back.
Borrowers have the right to mitigate or avoid these consequences by taking certain step, including; if they’re disabled, filing for a disability discharge.
But 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 have meant struggling borrowers face challenges accessing the lifelines to which they’re entitled.
In 2015, the government garnished the Social Security benefits of nearly 114,000 borrowersover 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.
But 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To make matters worse, outdated policies set the Social Security garnishment limit below the poverty limit.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.
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 a long-term medical condition 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 Educationwhether 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.
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.
1. How much can student loans garnish from social security?
They government can’t take your entire Social Security payment for a defaulted student loan. When you’re in default on a federal student loan; the government can garnish a maximum of 15% of your monthly benefit payment.
2. How long can social security be garnished for student loans?
Forever. So long as you’re in student loan default, they can keep taking your benefits and income tax refund.
3. Can you get medicare if you owe student loans?
Yes, you can get Medicare if you owe student loans. While the federal government will take your Social Security benefits and tax refund, they won’t take your insurance. You can keep your Medicare even if you’re in default.
4. Can pensions be garnished for student loans?
Typically, your pension can’t be garnished for student loans. There is at least one exception: the government can offset Railroad Retirement benefits for defaulted student loans.
There is always a way out. Finally, absent relief from the federal government or your ability to withstand garnishment, the main solution left 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. Than 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 linkand subscribe to this pagefor more updates on related works.