Financial Hardship Claims
Authored By: National Consumer Law Center
Link to Financial Hardship Claims Packet: www.studentloanborrowerassistance.org
Information About Federal Benefits Offsets
The government can take certain Social Security benefits, benefits under Part B of the Black Lung Act, and some Railroad Retirement benefits to collect government student loans. Just as with other types of student loan collection, there is no time limit on Social Security offsets, according to a 2005 Supreme Court Case. (Lockhart v. U.S., 126 S. Ct. 699 (2005)).
The government cannot take any amounts you get below $9,000/year or $750/month. No more than 15% of your total benefit can be offset.
Supplemental Security Income (SSI) cannot be taken. This is very important because collection agencies will sometimes claim that they can take SSI. This is not true and it is the type of statement that violates fair debt collection laws. Other benefits that the law says cannot be taken include Veterans Benefits and Benefits under Part C of the Black Lung Law. For a current list of all federal benefits that cannot be taken, click here.
|EXAMPLESExample 1: Francis receives a monthly benefit payment of $850. The amount that is offset is the lesser of $127.50 (15% of 850) or $100 (the amount by which $850 exceeds $750). In this example, $100 would be offset.Example 2: Malcolm receives a monthly benefit of $1250. The amount that is offset is the lesser of $187.50 (15% of 1250) or $500 (the amount by which $1,250 exceeds $750). In this example, the offset amount is $187.50 (assuming the debt is $187.50 or more).If Malcolm receives $750 or less, nothing will be offset.|
Challenging Federal Benefits Offset
The offset process is managed by the Financial Management Service (FMS) of the Department of Treasury. Before referring a debt to FMS for collection, the Department of Education must provide you with a notice.
You must request a review within 20 days of receiving a notice of offset. You have the right to first review and copy relevant documents. It is a good idea to make this request so that you know what is in your file. You may request an oral hearing instead of a written review, but you must send an explanation of why you think a written review is inadequate. As with other types of collection, you have the right to set up a repayment plan with your loan holder prior to offset. According to the Department of Education, you may exercise these rights even after the time deadlines, but in these circumstances, offset will not be delayed pending a resolution of your objections.
You may also request a reduction or suspension of offset because of hardship. It is in the agency’s discretion whether to grant this.
The Department of Education requires borrowers to submit the following documents before they will review a request for a hardship reduction:
- The notification of offset;
- The notification letter showing the amount of federal benefit;
- Proof of yearly income;
- A completed financial statement that must be returned to the Department of Education or guaranty agency within ten days. If the situation is an emergency, you may submit equivalent information such as an eviction notice or a court order of foreclosure in writing with the completed financial statement.
- A letter explaining the exceptional circumstances that caused the financial hardship along with any other supporting documents (see sample).
The Department will most likely ask you to fill out this form (also the form for wage garnishment) or something similar to show hardship. (Alert: If the on-line form is not available, you should contact your loan holder and request a financial disclosure form).