It has probably happened to you, or maybe you have an acquaintance who has received a letter asking them to pay their taxes or student loans and simply… ignored it. It’s the big pink elephant in the room, a kind of situation where the ostrich buries its head in the sand.
We know the problem is there, but we decide to ignore it, thinking that nothing will happen. We may even fool ourselves into thinking it’s no big deal, until our paycheck arrives… and there’s much less money than we expected. You can get your wages garnished, but did you know that it can happen to your Social Security benefits too?
The 15% limit
Yes, it’s true: the government can legally take up to 15% of your Social Security benefits to pay federal debts, including student loans. This is the case for many retirees who took out federal “Parent PLUS” loans to help their children pay for college. If these loans went into default, the government can withhold part of the parents’ Social Security to collect them.
However, your money is protected for most other debts: credit cards, medical bills, personal loans. There are four key exceptions where the government can seize part of your money, even if it’s from Social Security:
- Federal student loans, if they are in default and you signed as a guarantor on the Parent PLUS.
- Federal taxes to the IRS if you have overdue tax debts.
- SBA loans or fines (in general, all types of federal fines).
However, even with these debts, the government cannot leave you with less than $750 in benefits per month. Incidentally, this amount will be protected for decades by regulation, so the purchasing power of this amount of dollars has declined significantly.
This withholding of benefits has a huge and negative impact on the lives of senior U.S. citizens who depend on their fixed income, especially now that everyday expenses are starting to rise in price.
Those who are having difficulty repaying their federal student loans may consider programs such as income-based repayment plans or hardship relief, which can help them avoid defaulting on their loans.
Apart from federal student loans, there are other debts that can be legally garnished.
Unlike federal student loans or taxes, the money withheld for maintenance debts can be substantial and will vary depending on the order issued.
Another situation in which a retiree may face garnishment is if a government agency, including the SSA, discovers that a beneficiary has received an overpayment for certain benefits in the past.
In these cases, Americans may see their future benefit checks reduced to collect these debts, and the SSA typically notifies beneficiaries in advance and allows for appeals or requests for a reduction in the repayment amount based on financial hardship.
Child Support
There is one exception to the 15% limit. State laws allow social security benefits to be garnished to pay for unpaid child support, at least if there are minor children involved. In this case, the garnishment can be much higher than 15%, reaching up to 50-65% depending on the family situation and state laws.
On the other hand, if a court orders you to pay restitution to a victim for a federal crime, Social Security can be garnished to fulfill that order if you have not paid it first.
Social Security Excuse
Before we start thinking that the SSA is a bunch of villains, we must bear in mind that the Social Security Administration is required to withhold money from benefits if it receives a court order for garnishment.
If part of your Social Security benefits have been withheld for debt repayment, you should contact the court that made the decision directly.
This court can update the garnishment order, so it will send an updated order directly to Social Security. If you have further questions about garnishment for past-due tax debts, you can visit the official website of the Internal Revenue Service. If you have questions about garnishment for delinquent non-tax debts, you should consult the website of the U.S. Department of the Treasury.