Social Security Benefits can be Garnished
Banks and other creditors can’t touch your Social Security benefits. However, if you owe money to the U.S. government (for federal income taxes, federal student loans, child support and alimony, non-tax debt owed to other federal agencies, defaulted federal home loans and certain civil penalties) the federal government can garnish your Social Security benefits.
Today there are an estimated two million Americans aged 60 and older who are in debt from unpaid student loans according to the Federal Reserve Bank of New York. In the August 2014 “Household Debt and Credit Report” by the Federal Reserve Bank of New York the number of older Americans with outstanding student loans had increased from $8 billion in loans in 2005 to $43 Billion in August 2014.
The Federal Reserve Bank of New York goes on to state that at this time about 140,000 individuals have their Social Security benefits garnished to pay down student loans that are in default. In 2004 there were only 38,000 people who had their Social Security benefits garnished for student loan debt.
The average Social Security claimant receives $1,200 per month. This amount can be reduced by 15 percent ($180) to pay student loans. The most that can be garnished from your Social Security benefits is 15 percent, and your benefits should never be garnished below $750 per month. For example, let’s say your monthly benefit is $800, 15 percent won’t be taken— you’ll see just enough taken to reduce your check down to the $750 floor (the amount set by Congress in 1998). Also, only your net monthly benefit gets garnished, after deductions for things like Medicare. According to government data the total amount garnished from Social Security benefits was $150 million last year.
What Can You Do About It?
The Web site Tuition located at www.tuition.io/blog/ has several suggestions about what to do if your Social Security benefits are garnished:
- As soon as you get a notice that your student loans will result in a garnishment of your Social Security benefits, you have 20-days to request a review.
- Apply for a hardship exemption for the garnishment. Explain why the garnishment creates a hardship. For example, if the garnishment goes forward you can’t afford necessary medication or other necessary costs.
- Contact the Department of Education and discover how to get your student loan out of default. Try to get access to an income based repayment plan.
- See if you can consolidate your loans, then apply for an income based repayment plan.
Note: Supplemental Security Income (SSI) cannot be garnished under any circumstances.