School Loans May Bite Into Social Security and Disability Benefits

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THE NATION – Los Angeles Times – Dec. 8, 2005

School Loans May Bite Into Social Security and Disability

The high court rules that the U.S. may take as much as 15% of

benefits to pay off federally backed student loans.

By G. Savage, Times Staff Writer

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 another way of collecting on more

than $7 billion in delinquent student loans, many of which have gone

unpaid for 10 years or more. It could cost retirees as much as 15% of

their monthly benefit.

Generally, Social Security benefits had been shielded from seizure.

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 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. The government has guaranteed billions of dollars in

bank loans to college students, and the government assumes this debt

if the former students default. Lawmakers have made clear those debts

should not be forgiven because former students are disabled or

retired.

In 2003, the government estimated it had recouped about $400 million

a year by seizing Social Security benefits of debtors.

The court was ruling in the case of Lockhart, who attended four

institutions of higher education from 1984 to 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.

Lockhart sued three years ago to block the seizure of his benefits,

but he lost before a federal judge in Seattle and the U.S. 9th

Circuit Court of Appeals. Its judges pointed to the Higher Education

Act that authorized the government to seize benefits to pay old

student debts.

Separately, a U.S. appeals court in St. Louis came to the opposite

conclusion and pointed to a law that set a 10-year limit on the

government's collecting of old debts.

The Supreme Court took up the case of Lockhart vs. U.S. to resolve

the dispute and affirmed the decision of the 9th Circuit. The

justices concluded that the amended Higher Education Act had repealed

the 10-year limit.

Meanwhile, new Chief Justice G. Jr. handed down his

first opinion for the high court — and by tradition, it came in a

unanimous decision in a case of no great consequence.

The law permits defendants who have been sued to try to move their

case from a federal court to a state court, or vice versa. Generally,

these defendants need not pay the lawyer's fees of the other side if

they lose their bid to move the case, the court said in vs.

lin Capital Corp.

Fees should be awarded only when the litigant " lacked an objectively

reasonable basis " for moving the case, said.