My Social Security Income Is Being Zapped for Student Loans!

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Federal student loans are considered the preferred way for students who must borrow because they are often much cheaper and considered “safer” than private loans. But there are hidden dangers lurking within these loans that you need to be aware of. Because they are guaranteed by the federal government, they offer the government collection powers that ordinary creditors and collectors only wish they had. A reader recently wrote to us:

I am facing a crisis. I will be 66 in September. I am presently receiving Social Security and a small VA monthly pension. The Dept. of Education is threatening to garnish my income by the end of this month. I don’t really know what I’m going to do. What can I do to stop them?

While “private student loan lenders can’t touch your Social Security income,” the federal government can go after your Social Security payments to collect delinquent federal loans, explains attorney Joshua R. I. Cohen, a consumer law attorney who specializes in student loan law. This is part of the “Treasury Offset” program that also allows tax refunds to be intercepted to offset delinquent federal student loans.

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There are limits to how much Social Security income can be taken each month, though. According to the website

The government cannot take any amounts you get below $9,000/year or $750/month. No more than 15% of your total benefit can be offset.

In other words, if you receive Social Security payments of $750 or less per month, the federal government wouldn’t be able to take anything from your Social Security checks. If you received $1000 a month, though, they would do two calculations: The total benefit minus $750 ($1000 – $750 = $250) and 15% of the total benefit ($1000 x .15 = $150). Since they can offset the smaller of those two amounts, the maximum offset in this example would be $150/month.

Veteran’s benefits, including our reader’s VA pension, on the other hand, are exempt (or “safe”) along with other benefits such as Supplemental Security Income (SSI). A list of exempt benefits is available here.

Free Credit Check ToolIf you receive a notice of offset from the Department of Education, it’s important to act quickly. You have just twenty days to request a review. If you do, you’ll be given the opportunity to review your account records, demonstrate why your loan isn’t in default or is not enforceable (if that’s the case), and to avoid offset by arranging to repay the loan. Most importantly, requesting a review will halt the offset until it is completed. If you don’t respond during that short window, you can still request a review later, but it won’t stop the offset.

[Related Article: Over 50 and Deep in Student Loan Debt]

For someone relying on a limited income such as Social Security, anything that reduces their income can be devastating. So what can you do to reduce or suspend an offset? Cohen offers two suggestions:

  1. Temporary Fix: Demonstrate to the Department of Education that the offset will create a hardship. You’ll likely have to fill out a detailed financial hardship form, and it’s important that you fill it out as completely as possible. The Department of Education may require other information, so follow the instructions you receive carefully. If you are granted a reduction or suspension due to hardship, it will be good for twelve months, and must be renewed every year.
  2. Permanent Fix: Get out of default. Once you get your federal loan out of default, you can apply for income-based repayment which could bring your payments down to zero, Cohen explains. That program also comes with loan forgiveness for balances remaining after 25 years.

To get out of default, you may be able to consolidate or rehabilitate your loans. Either way, you only get one shot so it’s crucial that try to find a solution that will work for you in the long run. This worksheet summarizes the pros and cons of consolidation and rehabilitation. Again, if you successful in consolidating or rehabilitating your loans, you will then be eligible to apply for programs like Income Contingent or Income-Based Repayment Plans, which can lower your monthly payments to as little as zero.

Getting nowhere in your efforts to rehabilitate your federal student loan? You may want to talk with a consumer law attorney. “You have the legal right to cure your loan and get it out of default so take advantage of it,” says Cohen.

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  • Mary Hunt

    Great article, Gerri. This is going to be a huge problem in the US as more and more people reach retirement having not paid off their student debt. Very sad … and scary when you think about anyone trying to exist on $750 a month.

    • Gerri Detweiler

      So true Mary.

    • Kathy

      I am a nurse of 35 plus years, and ended up disabled. I have Spinal Stenosis. I tried over and over to keep working but finally just couldn’t stand or walk for only a few minutes. Have to stretch out for a while then I can get up for a bit again.

      In 2007 I applied for Disability per my Dr. and got it first time.

      My student loan was deferred at that time. I was still sure I could support myself somehow. In 2010 they said I had to get Dr. form that said I was 100% disabled, which I did. This year 2014 they sent the letters to an old address or so they said and just started taking $154 monthly from my $904 I get monthly.

      I had to move from my apt which was $650 for a 1 bedroom. I have to go to churches to get food as it is. Seriously, I get $15/month in Food Stamps.

      I don’t have TV or any of the normal stuff. It is no fun and if I could work, it would be so much easier. I hate this. Out of what I have left I pay car insurance, and my Kaiser med. insurance.

      I earned SSI/Disability from working for many years, but even with sending in the form with 2 different Drs, over the years saying I was 100% disabled the Student Loan people still are taking my money. I have called them many times.

      They couldn’t care less.

      I can’t afford an attorney. Sure doesn’t seem right.

      I wish I could finish paying the darn loan off. Now they charged $15,000 in charges because it was deferred. for 3 years. I can’t win this thing.


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  • Gbabest

    I am in the same position. At least you have one income that cannot be tampered with. I, on the other hand, have a retirement that may be accountable. Had to do it all over, I wouldn’t. I guess I went back to school too late . Didn’t graduate until I was 60 years old.

    • Gbabest

      Understand completely. In the same situation and the same age

  • Johanne DuFort

    I graduated from the University of Michigan School of Art a single mother of two with a BFA (magna cum laude) in 1984 and an MFA in 1986, and hopes to teach with my education certification.  I pursued jobs relentlessly and worked several simultaneous part time jobs.  I taught part time at U of M School of Art for seven years, Schoolcraft College for five years, and the Ann Arbor public school system as a substitute teacher for seven years.  I interviewed for many tenure track positions at notable colleges around the country.  When push came to shove, I didn’t really want to leave my children as I was not able to take them out of the state.  

    Between these jobs I made a substandard wage and married Robert in desperation late in 1986.  However, my husband was extremely abusive to me and my children. He would not permit me to use our household income (my contribution was meager) to pay on my student loans (amongst many other abuses).

    I left him in 1992 and became a Realtor to supplement my income in 1994.  In order to stall the Student Loan Collectors i signed a consolidation agreement in 1994.  I divorced Robert in 1996 and was awarded a small pension of $496 by DRO.

    I was spread too thin and had to quit teaching (my first love) and focus on real estate, as my teaching positions were very underpaid.  Unable to make a go of it financially, I filed for Chapter 13 in 1997 and completed the three year plan in 2000 with the help of an attorney.  My student loan was legally dischargeable!  I was led to believe that as the student loan program did not object to their participation in my bankruptcy plan and were accepting my payments that this loan would be discharged.

    I accepted Jerry’s proposal of marriage upon completion of my Bankruptcy plan in 2000.  Jerry worked at Pfizer and obtained his real estate license in this year.  In 2001 I received a notice that my student loan was not discharged due to a new law requiring the need for it to be seven years in repayment before discharge in bankruptcy and they were not going to count the years from 1986 to 1994 (before I consolidated).  By this standard my loan repayment was 5 years. This disqualified my student loan from discharge.

    Jerry and I were horrified and I felt that we should not have married.  Jerry hired an attorney to negotiate a settlement with the student loan department on my behalf and offered $36,000-40,000.  He had the funds available from the sale of his home.  At this time the student loan had accrued interest during my 3 year bankruptcy plan and was now capitalized to approximately $85,000 (or more).  They turned him down and he bought a house with this money.

    The student loan department would not negotiate a reasonable repayment based on my earnings.  The payments they demanded would have been a hardship for me.  Jerry and I still had five young adults/teenagers!  I regret to say that at this point I elected to ignore the student loan as I couldn’t work out an acceptable resolution with them.  I wish I hadn’t, but no option of a IBR was ever shared with me and the principle on the loan continued to grow regardless of any payments.  It seemed hopeless!

    In 2005-6 Jerry borrowed money and purchased a building and renovated it for his new real estate business.  He knew that Pfizer would not be an employment option for him for long.  It was perfect in that I could provide him with the broker’s license he needed to operate.  He is the owner of the LLC and I am the manager.  All monies left after paying the other independent contractors and expenses associated with the business are claimed as his annual income.  In 2012 he made $38,000. Sadly, many of the years before were losses as the real estate business is depressed.

    In 2007, The Department of Education hired the Holzman Corkery Law Firm to obtain a deficiency judgement and garnish my wages.  As I am not an employee of Jerry’s business this was not possible.  They also sent demands to all the banks in southeastern Michigan where they emptied any accounts with money in my name, of which I had one which was closed when this occurred.  Jerry hired Dan Cramer to protect his assets from them.  I was and remain uncollectable.

    I do help Jerry at his real estate office but am not paid. He cannot afford to pay me and the bills too.  I do not handle any cash; ever!  I do charge everything I buy and Jerry pays all of the bills.  Jerry seldom uses cash either, which means that all of our activities are easily tracked on credit cards statements.  Jerry pays the credit card balances in full each month.

    It’s 2012 and the Holzman Corkery Group have returned to make our lives a living hell!  Now it would appear their tactic is to prove Jerry defrauded them and therefore he should become responsible for my debt!  They wish to transfer my debt to someone who is collectable and i feel they are inventing this “fraud” issue to justify their demands for access to his information. This is a nightmare that is compromising our health and relationship.

    Jerry and I would like to work out a resolution but cannot responsibly agree to a payment plan that cripples our budget so much that bankruptcy or foreclosure become the only available option afterwards.  I am urging Jerry to be transparent with all his accounts at least to the beginning of the year.  I hope this suffices.

    We need the expertise of an attorney well versed in the ways of student loans and negotiating a settlement with the Federal Justice Department.

  • Maria

    Can they take social security disabiliyy income under same circumstances? Can collectors go after ssdi with same math exclusions?

  • Michael W

    Student Victims of School Student Loan Fraud are still be help responsible for the schools fraud in taking bogus loan out in the students names. I attended Tampa College, Tampa, FL in 1990-92 and they were found in a Department of ED report #N-0020921 in 1992 that the school was guilty of violating Title IV funding requirements. Besides taking loans out in students names with out authorization, they collected this extra loan money and the employees of the school were paying them selves from the proceeds. The Problem is that the Dept of ED nor the school did not contact the student to get these bogus loans discharged due to this fraud.. So 20+ years later alleges loans for $4K are now like $38,000 with interest and collection fees applied. And since the Dept of ED did not follow up with the victims the victims are on the hook. One lady victim is not getting her 15% of her Social Security taken away to pay on fraudulent loans produced by the school. This was a clever scam because the students did not even know they had bogus loan attached to then until a few years after they left the school, because student loans are deferred until at least 6 months after they leave the school or graduate. I have an original $8K applied to my name, they can only show proof of 5 of 8 loans but yet the dept of ED won’t dismiss them, because the school was closed and the bank is long gone with the loot. This is a masterful crime that continues to victimize naive students for decades. If you are a student and suspect criminal activity, request copies from collection agencies for all loan applications. Check to see if the signature on the application are really yours or forged, check to see if the dates match, or in my case loan amounts were changed after I signed the loans. All of these loan notes are considered “Altered Notes: and un-enforceable, and need to be discharged off your record and credit reports. Also in my case I was not even eligible to receive any loans from the puppy mill school because I had one other outstanding student loan that was in default the entire time I went to Tampa College, and thus under the regulations 34 CFR 682.402d 1994 the school is responsible to repay the loan not me the borrower or student. College is a scam, and be very careful and get copies of everything and save all your documents. I have a great paper trail of all of this, and still the Dept of Ed refuses to dismiss these. My case is now at the dept of Justice here in Tampa, and I am preparing with all my documents to be proactive and go down there and try to get these dismissed one and for all before they try to steal my property assets or Social Security garnishments of 15% per month in a few years.

    • Teresa

      Wow this is exactly what happened with me. Dept. of Ed garnished my Disability check several years ago and is still taking out every month along with our income tax every year. I tried and tried to get them to understand that I didn’t take out all the loans they were saying I did. 2 of the loans were not suppose to be paid back but then financial aid workers at the time redid paper work and did them with all new figures and claimed they changed because I had become an employee of the school so therefore my classes were suppose to be 1/2 price instead of being full price and also 1/2 of my classes were life experience and again my classes were to be at a lower price. when they redone my paperwork it showed full price for all classes which were incorrect. I have fought and fought with them and finally got tired of fighting. it has been over 20+ years. was at Tampa College from 1989 til 1991.
      Michael W. I would love to talk with you more about this.



    • Gerri Detweiler


      I checked with Joshua Cohen, aka The Student Loan Lawyer and he said, “To the best of my knowledge, yes, they can tap both at the same time.” He added, “Tell your reader the best piece of advice is to fix his loan! – get it out of default!” Contact him at his website and he will make sure you get the help you need. He says, “NO one should be in his shoes!”

  • Sammy

    I have a school loan that has been in collection since I was 26. I am now 38. I have never worked since and would like to know if they can take possession of anything I have of value?

    • Gerri Detweiler

      Sammy – What are you worried about them taking?

  • dmarshall

    I am 72 and my ssa retirement is $751. What can happen to me?

    • mike

      wish I had your problem stead of mine.
      the treasury cannot take from the first $750. you lucked out here

    • Gerri Detweiler

      Theoretically they could try to offset the $1 a month that is above the protected threshold of $750 per month. Hopefully the wouldn’t be that dumb but I supposed you never know!

    • Luckiestar

      I receive $754.00 and the loan people are trying to take $450 from me…but I read that they can’t take from a person that receives 750 are lessor…

  • dmarshall

    what is moderation?

    • Gerri Detweiler

      I am not sure what you are referring to. Can you elaborate?

  • Maja

    My Social Security is threatened to be offset by The Department of Education by the end of this year. My loans are 32 years old and Social Security is my only income. Should I retain an attorney?

    • Gerri Detweiler

      Maja – That’s up to you, though you don’t have to use an attorney to try the two steps I mentioned above on your own. (1. apply for hardship relief 2. get your loan out of default –

      • lee

        I am 72 my wife is 66 years old, she is in default on our daughters student loan over 40 years ago. Our only source of income is SS, but she gets less than $700.00 a month, I get over $1,000.00 dollars a month. She is the only signatory on the loan, I am not. Can the govt garnish my share of the ss payment.

        • Gerri Detweiler

          I don’t see how, Have you been notified of that?

  • Gerri Detweiler

    Unfortunately I have no idea whether you will be approved for your discharge or not. I imagine you will have to see what happens, and if you are denied, appeal the decision.

  • Gerri Detweiler

    Really sorry to hear what you’re going through. Have you tried the two steps in the article?

  • Gerri Detweiler

    The FAQ section on explains the process if your application is approved. My understanding is that this should be communicated to SSA but you may want to contact them to confirm. You can call Nelnet at 1-888-303-7818.

  • Peggy S. Lindsay

    I am 44 and have a 12 month old who is severely disabled. I can’t place him with anyone other than me 24/7 so due to this I am unable to work and have to live on his ssa of $721. A month. I was looking forward to my tax refund as it will help with bills and much needed things for the baby. It was accepted and said it would be deposited into my account now after digging around I found out they are sending it to the us dept of Ed. For my student loans which I thought were in deferment. Now this is causing me and my kids a hardship but they refuse to send me the refund. I have arranged for rehab of the student loan and the other one is actually in forbearance. What can I do to get my refund owed to me?

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  • ArmyVet76

    I have not had this issue in 6 years. I have been forgiven and my loan is expunged due to my Epilepsy. I make just over $900/month and get $200 taken out for medicare, and NOW THIS?! A 20 year old loan that was “forgiven”?

    • Gerri Detweiler

      If you can’t get this resolved through the Department of Education and the CFPB, you may need to reach out to a consumer lawyer with expertise in student loans. You can find one Hope you can get it resolved asap.

  • sherain moseley

    I am 61 my only income is ssdi. Student put a lien on my bank account and took 179.00. What can I do. I have been disable for 30 yrs.

  • Gerri Detweiler

    What kind of debt are they garnishing it for?

  • Seren ferch Dafydd

    1.Check to see if it is actually the Department of Education that owns the loan. If you loan is older than 10 years, it was likely sold to a Collection Agency. Are you sure it was actually the Department of Education and not the debt collector you got the summary from?

    2. Request a written history of your loan and all repayments. If debt collector cannot provide it, they may be bogus.

    3. Write the Department Education and explain the problem. There are programs in place to allow loan forgiveness for loans over 25 years old or in cases of disability. They may can help you if the loan is owned by a debt collector not the government

    4. With the small monthly payment, what is probably happening is that your payment is smaller than the requred payment to pay off the loan. The difference is added to the loan each month.

    Ex. Lets assume your total loan balance is $20,000 at 5% to be paid back in 10 years.

    Loan Balance:……..$20,000

    Loan payment:……. $212.12……….$128.80 (p)…..$83.33 (i)

    Your payment:……..$100.00
    Toward principle……$100.00
    Unpaid principle…….-$28.80
    Unpaid interest……..-$83.33
    Total unpaid………….$112.13

    Original loan balance $20.000
    New loan balance:……$20,112.12
    New monthly payment: $213.32

    The only way to fix this is to find some way to increase the payments as with the example above, even extending the repayment to 30 years requires a $107.36/monthly payment.

  • Gerri Detweiler

    @mike – this is a really good question. As I understand it you are trying to find out whether there is a record of the student loan payments made by offset twenty-some years ago. The short answer is I don’t know. But my first suggestion is that you ask the IRS. I know you can order a wage and income transcript for previous years. (From the IRS website: you must submit Form 4506T to request an account transcript for a tax year not available through get transcript online or by mail.) I am not sure if it will contain information about the offset.

    Will you call them and find out? If you can’t get it that way, let us know and we’ll try to dig a little more.

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