Did you know the US Government garnishes (takes money from) the Social Security payments of elders and disabled folks who owe student loans, and that they are not required to get a court judgment first?

FOR IMMEDIATE RELEASE: DECEMBER 20, 2016    Contacts: Persis Yu (pyu@nclc.org); 617.542.8010

GAO Report Shows Draconian Consequences of SSA Offsets for Student Loan Borrowers

Today, the Government Accountability Office released a report documenting the draconian consequences that the Department of the Treasury’s practice of garnishing Americans’ social security payments has on vulnerable student loan borrowers in default.
 
“Taking money from Social Security retirement or disability benefits to repay old student loans is an extraordinary collection tool. It is time to reexamine this program and weigh the true costs of taking Social Security benefits from elderly and disabled Americans against the small amount this brings into federal coffers,” said director of NCLC’s Student Loan Borrower Assistance project, Persis Yu.
 
The report found that for more than two-thirds of borrowers whose monthly benefit was below the poverty line, the money deducted from their Social Security benefits was enough only to pay fees and interest, so the amount of the debt was not even reduced. The report also found that of older student loan borrowers with a Social Security offset, 43% had held their loans for 20 years or more and 80% had held their loans for 10 years or more. “For too many borrowers, there is no light at the end of this tunnel,” said Yu.
 
Although there are rules designed to protect a portion of the recipient’s benefits, the dollar amount protected has not changed since 1996, and leaves a borrower with only $750/month ($9,000/year) to live on. There is also a process for borrowers to stop or reduce the amount of the offset if it is causing financial hardship, but the report found that the Department does not proactively tell borrowers about this right. “It is unacceptable that vulnerable borrowers are facing hardship simply because the Department of Education is not informing them of their rights.”
 
Since 2005, NCLC advocates have highlighted the need for Congress to better protect Social Security recipients. At a minimum, advocates have called for Congress to index the $9,000 exemption to cost of living or inflation increases and to apply a ten year limit to Social Security offsets.

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Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training. www.nclc.org
 
NCLC’s Student Loan Borrower Assistance Project provides information about student loan rights and responsibilities for borrowers and advocates. We also seek to increase public understanding of student lending issues and to identify policy solutions to promote access to education, lessen student debt burdens, and make loan repayment more manageable.

Outstanding New York Times exposé:

Wells Fargo’s legal success shows the overwhelming power that arbitration clauses have in shaping disputes between everyday Americans and huge corporations.

Since a pair of Supreme Court rulings in 2011 and 2013 allowed for the widespread use of arbitration, companies have had great success enforcing these clauses.