Pay Your Student Loans Now Or Risk Losing Social Security Later: Supreme Court Authorizes Collection of Student Loan Debt by Social Security Offsets
 
February 15, 2006
 

In a unanimous opinion authored by Justice Sandra Day O’Connor, the Supreme Court held that the United States government may collect long-overdue student loan debt by deducting money from Social Security checks. James Lockhart owed $85,000 in student loans he incurred between 1984 and 1989. In 2002, the Department of Treasury began withholding $93 per month from Lockhart’s $874 monthly Social Security checks. Lockhart sued, alleging that the Debt Collection Act’s 10-year statute of limitations barred the collection attempts. In Lockhart v. United States, No. 04-881, 2005 WL 3299398 (U.S. Dec. 7, 2005), the Supreme Court affirmed the dismissal of Lockhart’s petition and sanctioned the government’s efforts to collect Lockhart’s debt by offsetting his Social Security checks.

The Debt Collection Act imposes a general 10-year statute of limitations on the collection of debts. However, in 1991 the Higher Education Technical Amendments, 20 U.S.C. § 109a(a)(2), eliminated any time barriers to certain loans, including student loans like Lockhart’s. These amendments paved the way for the government, through the Debt Collection Act, to collect on student loans incurred many years ago but never paid.

After pursuing other statutorily-mandated channels of debt collection, the Debt Collection Act of 1982, 31 U.S.C. § 3711(a), provides that an agency can collect an outstanding debt by “administrative offset.” But the Social Security Act, 42 U.S.C. § 407(a) limits the availability of such offsets by providing that Social Security benefits are not “subject to execution, levy, attachment, garnishment, or other legal process.” It further protects this “anti-attachment” rule by requiring that any attempt to limit, supersede, or otherwise modify the section must do so by express reference to section 407(a).

The Supreme Court held that the 1996 amendment to the Debt Collection Act 31 U.S.C. § 3716(c)(3)(A)(i), contained just the express reference required by the Social Security Act because the amendment refers to section 407 of the Social Security Act and provides that all payments due under the Social Security Act are subject to offset. The Supreme Court also stated that the Higher Education Technical Amendments, despite their enactment prior to the Debt Collection Act amendment, still applied to remove the 10-year statute of limitations from debt collection through Social Security offsets. Finally, the Court declined to “read any meaning” into an unsuccessful effort in 2004 to amend the Debt Collection Act to authorize offset of debts older then 10 years.

For more information, e-mail Lindsey Gastright Churchill at lindsey.churchill@hklaw.com or call toll free, 1-888-688-8500.