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.
A provision in the 2008 Farm Bill? I can only think that this was added as a revenue generator to offset the cost of Farm subsidies
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.
In 2003, the U.S. began withholding $173 a month in Social Security benefits from Annie Brown, a paralyzed 75–year–old widow living in a nursing home to repay a defaulted $8,823 student loan the Education Department says she took out in 1989. The offset reduced Mrs. Brown's benefit to about $980 a month.
Mrs. Brown said a granddaughter had forged her signature on a loan application. Her daughter and a lawyer spent more than four years disputing the debt with the owner of the loan, United Student Aid Funds, a student–loan guarantor that also was acting as one of the Education Department's 21 debt collectors.
Read it all here.
VH: I don't know what to think about this except to repeat my thoughts on entitlement programs: Citizens that freely allow themselves to be wards of the state will reap what they sow. The state can and will hold your livelihood and well-being hostage to its greater political ends. Ask yourself, why the hell does the 2008 Farm Bill have anything to do with Social Security? It only does when one group is deemed worthless enough to be thrown under the bus for another group that is better connected and has better lobbying: The whims of the State change with the political winds. Who in their right mind wants to take a chance in their golden years with the state holding your livelihood in its grubby hands while listening to apologists for social security utter: "mistakes can happen, but over all, the process works?" I'm afraid too many. It is very sad that some of the senior citizens in this story have had to deal with the perniciousness of raw bureaucracy.