From CNBC:
The U.S. Department of Education has suspended the seizure of tax refunds, Social Security and other government payments to satisfy defaulted student loans until November, the agency said.
About 9 million people have a federal student loan in default, which means they’ve fallen at least 270 days behind on payments.
Why is it that the government has the power to seize Social Security benefits to collect on a student loan debt? We don't allow collection of other debts in this way. For that matter, why is it nearly impossible to discharge a student loan debt in bankruptcy?
I ask clients if they have outstanding student loan debts. I'd say that 90% have no student loan debt and are surprised at the question. The other 10% are surprised to find out that being disabled may have an effect on their student loans. It's like asking about disabled children. Most of my clients don't have disabled children so the question doesn't matter to them but for that minority of my clients who have disabled children, it matters a lot.
We do allow collections of other "federal" debts this way. The IRS can put a levy on Social Security benefits and so can the VA. Any other federal agency can attempt to collect from federal benefits through The Department of Treasury so why wouldn't that apply to The Department of Education?
ReplyDeleteIf somebody is disabled, it seems like any income-based repayment plan payments would be zero.
ReplyDelete@10:29
ReplyDeleteYeah but Charles didn't say "federal" debts as the point is, why are federal debts given special treatment?
@10:51
Actually, if someone is disabled, that's one of the few ways to get student loans discharged. But this is in regard to past-due owed student loans. Not sure how a disability discharge works as to previously owed student loans.
I've seen retirement PIA's of $800 being garnished for student loans. It's rediculous. Of course the current president is the one that made it almost impossible to discharge student debt in bankruptcy so don't expect it to change anytime soon.
ReplyDeleteWow this is a thing? I didn't realize this. I think they shouldn't be able to garnish SSA checks at all for such debt. Doesn't seem right. I also think the interest rates are too high.
ReplyDelete@ 10:51
ReplyDeleteBut it is "federal" debt because it falls under The Department of Education. That was my point, as you are correct, Charles did not mention that its was "federal" debt.
Private student loans do not fall under this collection process.
Why is it so hard to have student debt wiped away through bankruptcy? Who in their right mind would loan money to teens and young 20s people if it was easy to get it wiped out through bankruptcy. There would be no loans given at all to liberal arts students as most of them could probably qualify for bankruptcy immediately. Maybe that's not a bad idea but most student loans wouldn't be made if the lender looked at the prospect of immediate repayment after graduation.
ReplyDelete@1:04
ReplyDelete11:36 here. I think your response is directed to me. Your point is that federal debts are an exception to the rule that social security benefits cannot be attached.
That's not in dispute.
The question is WHY do we allow that? No question Congress can choose to do this, but it's an odd policy choice. If the Social Security Act was enacted to provide economic security to those who can no longer ensure their own economic security due to age or disability, why permit federal debts to endanger that, yet preclude private debt holders from attaching Social Security benefits?
@3:01
ReplyDeleteI don't think it's odd at all that federal debt would be collected from a federal benefit.
It's unfortunate that congress has allowed that to be a common practice because most everyone on benefits (most, but not all) have limited income and resources and it definitely puts them in a financial strain.
However, when you owe the bank money, they garnish your account. If you owe the IRS money they can take your return. Private or not it's all based on the same premise. None of them take into account your financial situation and how you plan to pay your bills.
Now, having said all that, SSI is generally not touchable because it's essentially federal welfare. Social Security Disability and Retirement and Survivors benefits is an "earned" benefits and not treated with respect to low income guidelines.
This is our government. I posted in another thread on this forum that if you expect the federal government to take care of you and protect you financially, that's a losing proposition. I never really saw it that way till I worked here.
Sadly, the government is not your friend and it's policies are not set up in the general public's best interests.
Social Security benefits can be garnished for child support and spousal support. So not just federal debts.
ReplyDelete"For that matter, why is it nearly impossible to discharge a student loan debt in bankruptcy? "
ReplyDeleteBecause of the dishonestly named Bankruptcy Abuse Prevention and Consumer Protection Act, signed into law in 2005 by George W. Bush. And enthusiastically supported by then Senators Hillary Clinton and Joe Biden.
https://theintercept.com/2020/01/07/joe-biden-student-loans/
@8:15
ReplyDeleteYou’re off by about 30 years. It’s been extremely hard to discharge federal loans since 1976. My bankruptcy professors emphasized the point to us in law school, and that was well before BAPCPA. The reasons given back in 1976 were concerns mentioned above, that students would graduate and immediately file for bankruptcy before starting a new job to get rid of their debt and not lose any significant assets. It’s completely unsecured debt, and you can’t liquidate a degree to try and make creditors whole.