Is Social Security taken for defaulted student loans? Social Security used to be completely unavailable to creditors. The original idea was that after someone who has worked their whole life makes it to retirement, that person should have some guaranteed income so that they can take care of themselves.
Social Security is still protected from most creditors, but the Treasury Department has been increasingly collecting defaulted student loans from the Social Security checks of retirees. From January to August 2012, they took money from the Social Security checks of 115,000 retirees. In 2007, they only took it from 2000 retirees.
The Treasury Department has the authority to collect up to 15% of someone’s Social Security check until that person’s student loans are paid in full. In practice, they often take a little less than this, but it is outside of your control.
Since the average Social Security recipient receives $1,230 per month, this means that they can take up to 184.50, leaving the retiree with only $1,045.50 for the month. This is barely enough for rent in many cities.
What is worse is that this garnishment often happens because of parent plus loans, or loans where the retiree is only a cosigner. This means that the retiree didn’t even receive the education, and that the government is collecting from the retiree even though they could also collect from the working age borrower.
What can you do to stop this? Not very much since student loans are very difficult to discharge in Chapter 7 bankruptcy or Chapter 13 bankruptcy.
The best thing to do is to avoid signing for other peoples’ student loans, and minimize your own student loans by going to a cheaper school and trying to pay as much of the tuition by working in college.
