WASHINGTON – The government can seize part of a person’s monthly Social Security benefit to pay off old student loans, the Supreme Court ruled Wednesday.
The 9-0 ruling gives the government an extra way of collecting on more than $7 billion in delinquent student loans. It could cost retirees up to 15 percent of their monthly benefit.
Generally, Social Security benefits have been shielded from being seized. But Congress revised the law in 1996 to allow specifically for the collection of unpaid student loans, the justices said.
This “provides exactly the sort of express reference” that courts must honor, said Justice Sandra Day O’Connor in what figures to be one of her last opinions.
The ruling may come as bad news for many baby boomers who are near retirement age. While the government has backed billions of dollars in bank loans to college students, those loans become the government’s debt if the former students default. Lawmakers have made clear those debts should not be forgiven simply because the former students are disabled or retired.
In 2003, the government estimated it had been recouping about $400 million a year by seizing the Social Security benefits of debtors.
The court was ruling in the case of James Lockhart, who attended four institutions of higher education between 1984 and 1989 and took out nine federally guaranteed loans. By 2002, he was disabled from diabetes and heart disease, and had $80,000 in unpaid student loans.
As a disabled person, Lockhart received a Social Security benefit, but the government withheld $93 per month to repay his student loans. His monthly benefit grew in 2003 when he reached retirement age, but the government then began withholding $143 per month.
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