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Wednesday, December 07, 2005

Supreme Court Decision: Social Security Benefits Are Fair Game

Student Loan Debt Horror Story Years ago, when the government emptied my bank account in order to satisfy a portion of the student loan debt that I wasn’t repaying, I was floored. I could not believe that the government had the power to take away all my money in such a manner. It was a wakeup call that I won’t ever forget, and it was, quite frankly, one that I really needed.

From this day forward, many retired and disabled folks who receive Social Security (SS) benefits, and who’ve made the mistake of disregarding their student loan debts, may experience the same shock and horror that I went through when they get their next SS check.
Today, the Supreme Court ruled against Mr. James Lockhart, the 67-year-old retired postal worker who’s SS check had been cut by 15% in order to make payments towards his 20-year-old student loan debt.
Lockhart’s case was controversial in 3 dimensions:
  1. Lockhart defaulted on his student loan debt 20 years ago, which means that his SS benefits should have been protected by the Debt Collection Act of 1982.
  2. The Social Security Act stipulates that SS benefits should not be "subject to execution, levy, attachment, garnishment, or other legal process."
  3. Lockhart claimed that he needed every penny of his monthly social security check ($874) to pay for food and the medicines he needs to treat his diabetes and heart disease. James Lockhart lives in public housing.
Today’s Supreme Court ruling sorts out 2 conflicting rulings made by 2 lower courts regarding Lockhart’s case and another similar case.
The 9th US Circuit Court of Appeals had ruled against Mr. Lockhart because The Court felt that the Higher Education Act gives the government every right to take a cut of Lockhart's SS benefits.

However, the 8th Circuit Court made a contradictory ruling in a case that was separate from, yet very similar to, the Lockhart case. The case involved Ms. Dee Ella, a Kansas City, Missouri woman who defaulted on her student loan debt 20 years ago; the 8th Circuit Court decided that the Social Security Act and the Debt Collection Act should protect Ms. Ella from having her SS benefits offset by the government.

So, basically, the job of the Supreme Court was to decide which Act of Congress should trump the other: The Higher Education Act (or, to be more precise, the Higher Education Technical Amendments) won out.
So now it doesn’t matter how poor or disabled your are, it doesn’t matter if you need every penny of your SS check to pay for life-preserving medicines and food, and it doesn’t matter if you defaulted on your student loan debt 30 or even 50 years ago: the government can--and most likely will--offset your SS benefits if you default on your federally subsidized student loans.

Your comments are welcome and appreciated.

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