There has been a lot of news coverage in the last several months about the student loan crisis.
What you may not know is that a sizable number of people receiving Social Security and Social Security Disability Insurance benefits have had their checks slashed due to student loan default.
Los Angeles Social Security Disability Insurance Attorney Vincent Howard of HOWARD LAW knows that in most of these cases, it's not the recipient's education, but rather the education of their children or grandchildren that is causing them to receive reduced benefits.
This something important that we want our clients to understand, because while your benefits may be protected from garnishment by creditors in a bankruptcy or other legal proceeding, it isn't protected by the government when it comes to student loans. What's worse, it's very difficult to discharge student loan debt in a bankruptcy proceeding.
So people are often stuck paying.
A recent analysis by SmartMoney.com looked at solely retiree Social Security benefits that were docked for student loan default, and found a huge increase over the last 12 years. From January to June of this year, there were approximately 115,000 Social Security checks that were docked on the basis of federal student loan default. Compare that to the total number of cases in 2007, when about 60,000 benefit checks were docked. In 2000? Just 6 checks were docked for the same purpose.
According to the Federal Reserve Bank of New York, people between the ages of 40 and 49 have the highest rates of default, with almost 12 percent more than three months behind on their payments.
Not only are student loan defaults happening more and more often, but the government is becoming more aggressive in enforcing payment when they can.
At most, the government will withhold 15 percent per check, though the first $750 is supposed to be off-limits. So if you receive a $1,235 check, you can expect about $190 to be deducted for default loans. However, if your check is closer to around $800, the most they could collect would be $50, even though 15 percent would be $120.
With SSDI, many recipients end up receiving back pay once their claim is finally awarded. Someone who has defaulted on student loan payments may find their back pay is significantly reduced by the Treasury Department collecting its share of the debt.
The one piece of good news is that those with disabilities may have a better chance than a healthy individual of successfully gaining a deferment or forbearance. For individuals whose finances are in shambles and may simultaneously be seeking bankruptcy relief, he or she may have a good shot at proving undue hardship. There are typically strict guidelines for proving this, and those include:
- That you are unable to maintain a minimal standard of living for you and your dependents if you are forced to pay this loan;
- There are additional existing circumstances (i.e., your disability) that indicate your current state of affairs is likely to persist for a large portion of the loan repayment period;
- You have previously made good faith efforts to pay your debt.
Our attorneys have extensive experience in handling both SSDI claims, as well as bankruptcy.
Los Angeles Disability Benefits Attorney VINCENT HOWARD at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
More Social Security Money Withheld Because of Unpaid Student Loans, Aug. 17, 2012, By Susanna Kim, ABC News
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Brain Tumor Patient Dies, Is Denied SSDI, Nov. 4, 2012, Los Angeles Social Security Disability Lawyer