Social Security Benefits Cut If You Owe Money

Here’s a warning to senior citizens and those on disability:
If you’re on social security and you owe the government money, such as unpaid taxes or student loans, the government may start deducting what you owe from your monthly social security checks.

Defaulted Loans May Haunt Seniors

by Ellen E. Schultz – Wall St. Journal – March 8, 2010
A little–noticed law could soon result in smaller Social Security checks for hundreds of thousands of the elderly and disabled who owe the U.S. money from defaulted loans and other debts more than a decade old.
Social Security benefits are off–limits to creditors, such as credit–card companies and banks. But the U.S. can collect debts to federal agencies by “offsetting,” or withholding Social Security and disability payments.
The Treasury currently withholds benefits of 3.1 million Social Security recipients to recover defaulted student–, farm– and small–business loans, unpaid income taxes, amounts veterans owe for health care, and other debts to the government.
Previously, the U.S. hasn’t been able to withhold Social Security payments to recover most debts delinquent for more than ten years.
But a provision in the 2008 Farm Bill lifted the ten–year statute of limitations on the government’s ability to withhold Social Security benefits in collecting debts other than student loans—for which the statute of limitations was lifted in 1997—and income taxes, where the limit remains 10 years.


This means that a person who defaulted on a small–business loan in 1995, for example, and who is receiving Social Security could be notified that his benefits may be reduced each month until the debt, with interest, fees, and penalties, is paid. The Treasury can withhold 15% of the benefit, though it can’t be reduced to below $750. Tax debts have no floor.
The change will add more than $6 billion to the $75 billion in delinquent debt individuals owe the government, according to the Financial Management Service, the Treasury’s debt collection unit.
A Treasury spokesman says the new legislation “allows Treasury’s Financial Management Service to collect older debts and levels the playing field so that all eligible debts, regardless of age, are subject to debt collection. Treasury expects this legislation will result in increased collections of $10 million per year in delinquent federal non–tax debt.”
Though no one argues that people shouldn’t repay their debts, the change is coming at a challenging time for older Americans already pinched by mortgage woes, pension cuts and spiraling medical costs.
The shift applies to debtors of all ages, but Social Security recipients will bear much of the brunt. A Wall Street Journal analysis of Treasury Department data shows that Social Security recipients comprise a large and growing percentage of people from whom the Treasury recovers debts.
For years, most debt the Treasury collected through its “Offset Program,” came from withholding income–tax refunds. But with an aging population and growing unemployment, roughly 10% of the $4.3 billion in debts collected by the Treasury came from Social Security benefits in 2008, the latest figures available. That’s up from 1.6% in 2001, according to Journal computations that the Treasury confirms.
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Doc's Wife
Doc's Wife
10 years ago
Reply to  Dr. Eowyn

Steve–that is a great idea! I am on board.

Ovidiu Stefan
Ovidiu Stefan
10 years ago

agree steve

10 years ago

I just made a word document to send with my census. I included the link to Article 1 Section 2 and the wording of Section 2. I asked by what authority can they ask me any other questions. I might face fines but I believe I’ll prevail in the end if our Constitution isn’t totally destroyed by this administration.
Here’s the link:

10 years ago

Thanks, Steve and Eowyn. Guess I missed that when I was out of town or something. This letter is MUCH better than mine, so I will copy, paste, print, and send!

timothy guillory
timothy guillory
10 years ago

i been working a long time , now i can social security say i owe them $34,000.00 have been in wheelchair for 25 yr. i have ticket work program the counsel did not i just dont what to do please if you can help . e- mail back