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Between 2005 and 2013, federal student loan balances grew substantially for the US population overall, recently topping the $1 trillion mark. Student loans have become an enormous burden to Americans unable to secure a good paying job, but consider carrying a large student loan debt and being disabled and unable to work. How in the world can someone who cannot work be expected to repay large student loan debts? Contrary to the hype from Fox News, Americans on social security disability are hardly living large: the average social security disability check is $1,146. That meager monthly benefit does not go up other than the measly cost-of-living adjustment in December of each year.

The Government Accounting Office (GAO) recently released a very interesting report titled “OLDER AMERICANS: Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Retirees”.  Many do not know that the federal government can and does garnish social security benefits in the case of federal student loans in default. While the federal government will not garnish the entire benefit check until the debt is paid (the most that can be withheld from a Social Security beneficiary’s check is 15% after any deductions required by law authorizing the reduction, such as medical premiums and the first $750 of monthly benefits is protected) any reduction to the modest monthly social security check can be catastrophic.

The surprising number of social security retirement recipients over the age of 65 in this report seems to be the feature garnering media attention.  For me, the GAO report is notable in this startling fact: 70.6 percent of defaulted borrowers (105,000) whose Social Security benefits were offset were in fact social security disability benefit recipients.

So what is a social security disability beneficiary with large unpaid and unpayable student loans to do? There are 2 primary options: seek a discharge (forgiveness) of the debt or file for bankruptcy protection.

Federal student loans can be forgiven if one proves “total and permanent disability” (TPD). To secure a TPD debt discharge, the disability must be expected to last at least 60 months, so social security disability recipients need to find out when social security expects to review their disability status. For example, Texas Administrative Law Judges often provide for a 1 or 2 year review of disability status for persons who might be expected to recover with further surgery and/or therapy. Even if the ALJ says nothing in her decision about future disability reviews, the Social Security Administration will make a determination of when a review can be expected, and will set that determination out in the Award Letter. Discharge of a federal student loan for TPD based upon a social security disability award requires that the review recommendation be in the “5-7 year” review category

Successful completion of a bankruptcy can provide for a discharge of debts, including student loans. Common lore is that student loans are not dischargable in bankruptcy; a more correct statement is that the discharge of a student loan is more difficult than the discharge of credit card debt.

A recent study of student loans and bankruptcy found that 4 in 10 student loans were in fact discharged. These were all bankruptcies involving student loans. I would expect the rate of student loan discharge for social security disability recipients to be higher. The New York Times recently profiled a young man who lost his eyesight and was able to secure a discharge of his $89,000 student loan debt in bankruptcy court.

A consultation with an experienced bankruptcy attorney is in my opinion a must for those on social security disability with large unpayable student loans. By the looks of the above GAO report, it appears too few social security disability recipients are taking action to deal with unpayable school loan debt.