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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 StudentLoanBorrowerAssistance.org:
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.
[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:
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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Image: nick wiesner, via Flickr
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