Social Security Benefits
Withheld to Pay Past Student Loans
by Lance Hegland
Imagine attending school over
10 years ago, having outstanding student loans, eventually being
deemed disabled or retiring, and receiving notification that your
student loan payment would be deducted from your $784 Social Security
check. Would you be surprised? James Lockhart was. He requested the
help of legal aid. As they began to look into the issue, they realized
the case may be much more complex than it originally seemed. In fact,
the case recently reached the United States Supreme Court.
James Lockhart
became unemployed in 1981. He attended college from 1984 through
1989 using student loans issued by various lenders. The loans were
insured by the federal government in the event Mr. Lockhart failed
to repay them. Although he was able to secure employment during
1987, it only lasted for a few months. After a few years, the lenders
of the loans made claims under their federal insurance coverage and
the loans became the responsibility of Department of Education.
In 2002, the Department of Education, working in conjunction with
the Social Security Administration, began withholding a portion of
his Social Security Disability Income (SSDI) check as repayment for
the past due student loans.
At the time Lockhart brought this case to court, he was 65 years
old, receiving a monthly Social Security check in the amount of $874,
receiving monthly food stamps in the amount of $10, living in public
housing, paying for significant medical services, and purchasing
several prescription medications. His request for an administrative
review, which possibly included a hardship waiver because of his
health status and limited income, was denied.
This case was particularly interesting because it involved a complex
interaction of three different laws and later amendments passed several
years apart: the Social Security Act of 1935, the Higher Education
Act of 1965, and the Debt Collection Act of 1982.
Originally, Social Security
benefits could not be legally withheld or diverted to repay debts;
they were legally protected according to the Social Security Act.
During 1983, the authors of the Social Security Act amendment attempted
to further protect Social Security benefits from being diverted
for other purposes. Basically, the law said that Social Security
benefits could not be diverted by future laws unless those future
laws specifically said, in very clear terms, that Social Security
benefits could now be withheld under the new law even though the
Social Security Act said those benefits shouldn’t
be diverted. In other words, legislators writing new laws that may
divert Social Security benefits would need to play a game of “Simon
Says” by writing “Simon says we can now divert Social
Security benefits even though we realize that we couldn’t before
because of the Social Security Act.” “Simon Says” rules
had been used when writing laws in hopes those laws would not be
accidentally changed in the future; this was not a tactic used only
in the Social Security Act.
Besides the original protection offered by the Social Security Act,
the Debt Collection Act said that debts over 10 years old could not
be legally collected; any debts over 10 years old were expired. Then,
the Higher Education Technical Amendments of 1991 changed the Higher
Education Act to allow the collection of certain student loan debt,
no matter how old the debt was.
Mr. Lockhart’s student loan happened to be one of those student
loans that could be collected no matter how old it was. In relation
to this case, Mr. Lockhart and his attorneys pointed to historical
legislative records covering the Higher Education Technical Amendments
of 1991 that seemed to suggest the primary motivation behind law
change was to allow the government to continue withholding tax refunds
to pay student loan balances more than 10 years old. Besides, the
lawmakers apparently didn’t intend the unlimited collection
period to apply to Social Security since the specific “Simon
Says” phrase was not used. But, the issue related to Social
Security most likely was not raised as Social Security benefits were
still protected in 1991 by the Social Security Act.
In 1996, the Debt Collection
Act was changed by the Debt Collection Improvement Act to say that
certain unpaid debts could be collected from Social Security. This
time, the specific “Simon Says” phrase
was used. Here again, Mr. Lock-hart and his attorneys pointed to
historical legislative records covering the Debt Collection Improvement
Act which suggested that legislators were concerned regarding how
the provisions would be implemented, especially when applied to individuals
relying upon Social Security benefits as their only source of income.
Lockhart further suggested that the unlimited collection time provided
by the Higher Education Technical Amendments of 1991 did not apply
since that law did not specifically use the “Simon Says” phrase;
therefore, debts older than 10 years could not be collected by withholding
Social Security benefits. Lockhart went on to point out that legislation
introduced in 2004, which would have allowed Social Security benefits
to be withheld and applied toward debts older than 10 years, was
voted against.
In this case, the Supreme
Court decided the “Simon Says” phrase
was not necessary and the legislation introduced in 2004 was redundant.
Over the past decade or so, courts have decided that such “Simon
Says” rules simply waste time and money “jumping through
hoops” and have told legislators that they must be more careful
when writing new laws. Meaning, legislators are responsible for understanding
existing laws and how any new laws will impact the old laws. Consequently,
if legislators write a new law that contradicts an old law, the court
will assume the lawmakers simply intended to rewrite the old law.
But, is it realistic for legislators to have knowledge of all existing
laws and all potential impacts of their new laws? Perhaps not as
individuals, but such expectations may be reasonable considering
legislators often rely on the advice of, or usually receive feedback
from, research assistants, policy analysts, and lobbyists representing
both sides of the issue —at least I believe they should actively
seek and consider concerns, comments, and questions from those impacted
by new laws.
Perhaps the only unresolved
issue for the aging and disability community in relation to students
is whether or not the Department of Education’s
hardship waiver program requirements are unrealistic – might
they be too strict and causing individuals to experience economic
hardship and emotional distress? Perhaps the true underlying issue
for lawmakers is whether or not they are insuring they have sufficiently
considered the impact of laws they are authoring or sponsoring, and
if so, have they documented their true intent and potential misapplications
within the text of the law.
Unfortunately, this
Supreme Court decision could have significant implications for
individuals with disabilities who use student loans to return to
school as part of their rehabilitation program. In the event an
individual’s rehabilitation program does not deliver
expected results, or in the event the individual’s health deteriorates
and prohibits that person from returning to work, and that person
does not have sufficient assets or other income allowing them to
repay student loans without jeopardizing the satisfaction of their
basic needs, could they be at risk for economic hardship and emotional
distress as well? If that risk is possible, will individuals with
disabilities shy away from rehabilitation programs incorporating
additional education funded by student loans? Could this undermine
vocational rehabilitation and retraining programs?
Will subsidized housing
programs base rental rates on the full (pre-repayment) monthly
disability/retirement payment or will they only consider the actual
disability/retirement income received (less the repayment)? If
so, federal, state, and local public housing income could also
be decreased, in a sense funneled into the student loan program.
Perhaps targeted individuals will rely more heavily on other public
programs (e.g. financial assistance, food shelves, and heating/utility
programs) to offset for their withheld income. Again, those programs
which are already alarmingly under funded may experience greater
demand, again suffering because of resources “reinvested” in
student loans.
Time will tell . . .
