The Government Can Take Your Social Security to Pay Student Loans, But Maybe Not for Long

Published

December 14, 2015

Christine DiGangi is the former Deputy Managing Editor - Engagement for Credit.com and covered a variety of personal finance topics. Her writing has been featured on USA Today, MSN, Yahoo! Finance and The New York Times International Weekly, among other outlets.

Failing to repay your federal student loans can have serious consequences, from a damaged credit rating and debt collection to lost tax refunds and wage garnishment. The government can also garnish your Social Security benefits, though legislators introduced a Senate bill aimed at ending this penalty on Thursday.

Unveiled by a group of Democratic senators, the Protection of Social Security Benefits Restoration Act would repeal a 1996 law that allows the Uncle Sam to garnish earned benefits in order to clear out federal debts. That’s a good thing, because in 2002 and 2013, Social Security garnishment increased by 400% — from about 31,000 to 155,000 people — according to a report from the Government Accountability Office cited in the bill’s summary. And in that time, the number of people aged 65 and older whose Social Security was garnished increased from nearly 6,000 to 36,000 — a 500% increase.

One would have to forgo student loan payments for a long time to get to this point, as federal student loan default occurs after 270 days, or nine months. However, that doesn’t mean wages are garnished indefinitely. You can get out of default by going through the federal student loan default rehabilitation program or consolidating student loans.

Whether you’ve missed one or nine payments, stop running from your student loan debt. Contact your loan servicer to ask about options and make a plan to get out of debt. Student loan debts are rarely discharged in bankruptcy, so you’ll have to deal with them sooner or later, lest you want to face a future of lost earnings.

Even if the Democrats’ bill becomes law and makes social security benefits untouchable, student loan default can wreck your financial health, especially your credit scores. You can see how student loans are impacting your credit with your free credit report summary on Credit.com.