To know How much can Student Loan take from Social Security….Read on this article….!
Due to the high tuition fees at colleges and universities, many students often resort to student loans to get themselves through college.
This article centers on how the inability to pay back these loans can lead the lender to offset the student’s Social Security benefits as a means of payment.
What is a Student Loan?
A student loan is an amount of money borrowed by a student to fund his or her post-secondary education or college-related expenses. These loans are aimed at covering the cost of tuition, books and supplies, and living costs while the student is in the process of pursuing a degree.
For many of these students, paying college tuition fees through their pockets and savings simply is not sustainable. The outcome is that more students and families are depending on loans to pursue tertiary education, and the average student loan debt keeps rising.
Although there are many types of student loans, they can be categorized into two main types:
- Federal student loans:These are loans sponsored by the government. These loans normally have more profitable terms, including but not limited to flexible repayment plans and lower interest rates compared to private loans. Students with outstanding financial needs may qualify for subsidized loans while unsubsidized loans are accessible regardless of the student’s financial need.
- Private student loans: These loans are sponsored by private bodies such as banks, online lenders, credit unions, and other financial institutions. They are characterized by higher borrowing limits and interest rates. However, unlike federal student loans, private student loans have less flexible repayment plans.
What is Social Security?
Social Security is an insurance program in the United States of America, run by a federal agency known as the Social Security Administration (SSA), that gives retirement benefits, survivor benefits, and revenue to retirees, disabled people, children, survivors, and spouses. Social security has a powerful effect on all
levels of society. The benefits of social security are:
- Provision of the older population with income security in their retirement years.
- Maintenance of durable labor relations and an efficient workforce for employers.
- Contributes to social inter-relatedness thereby leading to the country’s prevalent growth and development by improving the standard of living.
- Allowing the basis for a better positive direction towards globalization.
- Providing access to healthcare and protection against loss of income to workers and their families.
How Much Can Student Loans Take From Social Security?
As stated earlier, Social security benefits are meant to support one after retirement. However, many student loan borrowers have lost that privilege. This is because, when a student borrows a federal loan and is unable to pay as when due, the lenders (which in this case is the government) can take from such borrower’s Social Security benefits as repayment.
According to the “Debt Collection Improvement Act of 1996”, if a borrower defaults on his or her loan without being in deferment and misses payment for 270 days, the government is allowed not more than 15% of a loan defaulter’s Social Security benefits, nor can they leave the borrower with less than $750 a month or $9,000 a year. This process is called Garnishment.
However, this act does not provide the borrower with much insurance because the standard of living has inflated since then. In addition, the garnishment cannot occur until two years after the student defaults on a loan, providing him or her sufficient time to contact the lender to adjust the repayment strategy.
Statistically, about 173,000 borrowers (most of them aged 50 and above) had their Social Security benefits garnished in 2015. Three years later, between 2015 and 2018, lenders took $2.3 billion in Social Security garnishments.
Ways To Stop Social Security Garnishment Due to Student Loans
The following are ways to stop Social security garnishment:
- Paying off the loan in full: If the creditor is paid the loan in full, Social security garnishment can be prevented. However, this method is not entirely advisable, because practically speaking, not many people have the means of paying all their loans in full.
- Filing a Claim of Exemption: When a borrower is unable to pay his or her student loans, he or she can file a claim of exemption based on personal difficulties such as feeding thereby stopping Social Security garnishment.
- Working with a Credit Counsellor: There are several non-profit credit organizations that specialize in helping student borrowers negotiate with their lenders in order to help them get a more manageable repayment plan.
- Filing for Bankruptcy: As extreme as this option might seem, in some cases, it is the best option. By filing for bankruptcy, the borrower is able to put a temporary pause on the payment of the student loans and subsequently, the garnishment of his or her Social Security benefits.
Conclusion
Over the 10 years, the number of citizens (aged 60 and above) whose Social Security benefits have been garnished because of unpaid student loans has increased drastically from 8,200 to 65,300.
Therefore, to prevent Social Security garnishment, students with federal loans are to ensure they do everything they can to prevent a default.
Frequently Asked Questions
- Can Social Security benefits be garnished to pay off private student loans?
Answer: It is important to note only the government is allowed to garnish a borrower’s Social Security benefits. Private lenders are not allowed to do so.
- Can a co-signer on a student loan have his or her social security benefits garnished?
Answer: Yes, a co-signer can have his or her social security benefits garnished if the primary borrower (the student) defaults in paying the loan thereby shifting the payment responsibility to the co-signer.
- Can a student temporarily stop paying a loan without social security garnishment occurring?
Answer: Yes. Repayment options such as Deferment and Forbearance can allow a borrower to temporarily stop making payments on a loan if he or she is experiencing hard times such as difficulty paying bills and feeding.
- How can a borrower make up for missed payments without having his retirement benefits garnished?
Answer: There are several ways a borrower can make up for missed loan payments. Some of which are;
- Applying for an income-driven repayment scheme.
- Student loan consolidation.
- Loan rehabilitation.
- Loan refinancing.
