Showing posts with label Social Security Offsets. Show all posts
Showing posts with label Social Security Offsets. Show all posts

Wednesday, August 9, 2017

Disabled Veteran wins stipulated discharge of student loans in a California bankruptcy court: "Snap out of it!"


The Department of Education has said publicly that it will discharge student-loan debt of people who are disabled. Unfortunately, the right hand sometimes does not know what the left hand is doing. Thus, some disabled people who defaulted on their student loans are still being hounded by the Department of Education or one of its debt collectors.

Jaime Clavito, a disabled veteran of Filipino descent was one of those people. Jaime filed for bankruptcy in California without a lawyer in order to get his student loan debt discharged (about $100,000). DOE opposed him in bankruptcy court, and a trial date was set.

At some point, however, DOE looked closely at Mr. Clavito's evidence and agreed to a stipulated discharge of his student-loan debt.

It is not clear from the record why DOE agreed to a discharge of Jaime Clavito's loans just a few days before trial. DOE's short stipulated agreement to a discharge is only two sentences long and says this:
Pursuant to the agreement of the parties, the United States Department of Education consents to entry of judgment granting a discharge of the plaintiff's student loans pursuant to 11 U.S.C. sec.523(a)(8), each party to bear their own attorney fees and costs. The parties request an order from the Court approving the stipulation and taking the trial (set for 8/14/2017) off calender.
I think, however, the DOE attorneys became convinced that Jaime was entitled to a discharge when they saw the evidence he filed showing that he is disabled.

It is unfortunate that Jaime Clavito's case was resolved so close to the trial date. Being in litigation against the federal government is undeniably stressful, and Jaime Clavito must have endured months of anxiety before finally obtaining his discharge.

Jaime Clavito's victory is similar to the victory Richard Precht won last year, when DOE stipulated to a discharge of his student loans. Like Mr. Clavito, Mr. Precht had a very strong case. He was living on only $1200 a month and his Social Security checks and small pension payments were being garnished.

DOE's first response to Mr. Precht's lawsuit was to file a motion to strike his complaint. Eventually, however, a DOE attorney looked at Richard Precht's voluminous evidence and signed a stipulation agreeing to a discharge of Richard's student loans.

What doe these two cases tell us? Two things.

First, people who have been officially determined to be disabled and people who are living below the poverty line on Social Security income are entitled to have their student loans discharged.  DOE is on record that it will discharge student loans by people who are disabled. As far as I know, DOE has no official policy to consent to discharges for impoverished Social Security recipients, but these people's cases are so strong, I don't think DOE will fight them.

Second, disabled people and people whose Social Security checks are being garnished may have to get DOE's attention in order to get their student loans discharged. DOE initially opposed student-loan discharges for both men, and they both had to file adversary proceedings in bankruptcy court before DOE woke up and agreed to discharge their loans.

People in Mr. Clavito and Mr. Precht's position remind me of that famous scene in Moonstruck, when Ronny Cammareri (played by Nicholas Cage) professes his undying love to Loretta Castorini (played by Cher). Loretta reminds Ronny that she is engaged to be married to Ronny's brother Johnny, but Ronny persists.

Finally, Loretta slaps Ronny hard across the face and yells, "Snap out of it!"

That's basically what Mr. Clavito and Mr. Precht did. By filing for bankruptcy, they figuratively slapped the DOE lawyers across the face and yelled, "Snap out of it."

So if your financial situation is similar to that of Mr. Precht and Mr. Clavito, you need to gather your evidence and file for bankruptcy. Then you need to file an adversary lawsuit against DOE or the debt collector who holds your debt and ask the bankruptcy judge to discharge your student loans.

When you do that, you will be slapping the Department to Education hard across the face. "Snap out of it,!" you will be saying. And I think that will feed pretty good.

References

Jillian Berman. Why Obama is forgiving the student loans of almost 400,000 people. Marketwatch.com, April 13, 2016. Accessible at http://www.marketwatch.com/story/why-obama-is-forgiving-the-student-loans-of-nearly-400000-people-2016-04-12


Clavito v. U.S. Department of Education, Adv. Proceeding No. 16-02238-B (E.D. Cal. Aug. 8, 2017) (Stipulation For Entry of Judgment Against The United States Department of Education).

Clavito v. U.S. Department of Education, Adv. Proceeding No. 16-02238-B (E.D. Cal. Aug. 8, 2017) (judgment signed by Bankruptcy Judge Christopher Jaime).


Precht v. U.S. Department of Education, AD. PRO. NO. 15-01167-RGM (E.D. Va. 2016) (consent order).

Press Release of U.S. Department of Education, U.S. Department of Education to Protect Social Security Benefits for Borrowers with Disabilities, April 12, 2016, accessed August 9, 2017.

Michael Stratford, Feds May Forgive Loans of Up to 387,000 BorrowersInside Higher Ed, April 13, 2016.

Monday, May 15, 2017

The Protection of Social Security Benefits Restoration Act: Will there be bipartisan support?

Senators Ron Wyden (D-OR) and Sherrod Brown (D-OH) reintroduced the Protection of Social Security Benefits Restoration Act a few days ago. If adopted into law, this bill will stop the federal government from garnishing the Social Security benefits of elderly people who defaulted on their student loans.

This is a good bill, and it deserves bipartisan support.

Late last year, the General Accounting Office released a report on governmental offsets of Social Security benefits. The GAO documented that 173,000 people had their Social Security checks reduced due to defaulted student loans in 2015. This is nearly a five-fold increase from 2002, when only 36,000 people had their Social Security checks reduced for that reason.

Senators Wyden and Brown first introduced this bill in 2015, when it had five additional co-sponsors. This year the bill has 10 additional co-sponsors--all Democrats: Senators Dianne Feinstein (D-CA), Kirsten Gillibrand (D-NY), Patrick Leahy (D-VT), Jim Merkley (D-Or), Bill Nelson (D-FL), Bernie Sanders (D-VT), Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), Mazie Hirono (D-HI), and Brian Schatz (D-HI).

Surely this bill will garner widespread support among both Democrats and Republicans. If ever there was a bill that deserves bipartisan support, this is it.

Americans should watch this bill closely to see if it makes its way into law. Any Senator or Congressperson who votes against this bill should be voted out of office. Any federal legislator who tries to delay the bill or prevent it from moving forward should be given the boot.

Admittedly, this bill will only make a small contribution to relieving the suffering of overburdened student-loan debtors. Eight million people have defaulted on their loans and almost 6 million more have been forced into income-driven repayment plans that stretch their payments out for 20 to 25 years. Millions more are not making their loan payments because their loans are in deferment or forbearance.

No reasonable person can argue against passage of the Wyden-Brown bill. If the Protection of Social Security Benefits Restoration Act fails to become law, it will be a sign that our elected representatives cannot work together to solve real and obvious problems, which will mean our country is in real trouble.

Senator Ron Wyden (D-OR)


References

Brown Introduces Bill to Stop Government from Taking Away Social Security Benefits to Pay Off Student Loans. Brown Press Release, May 3, 2017.

Senate Democrats Introduce Bill to Stop the Government From Taking Away Social Security Benefits to Pay Off Student Loans. Wyden Press Release, December 10, 2015.

United States Government Accountability Office. Social Security Offsets: Improvement to Program Design Could Better Assist Older Student Borrowers with Obtaining Permitted Relief. Washington DC: Author, December 2016).


Tuesday, February 7, 2017

Betsy DeVos is the new Secretary of Education: How About Bipartisan Support for Senator Warren & Senator McCaskill's Bill to Stop Garnishing Social Security Checks of Elderly Student-Loan Defaulters?

Any excuse for a slumber party, right?

Yesterday, Democrats kept the Senate in session all night to register their opposition to Betsy DeVos as the  new Secretary of Education. But Vice President Pence broke the tie vote in the U.S. Senate this morning, and today Betsy DeVos is President Trump's new Secretary of Education.

Senate Democrats bitterly opposed DeVos's nomination, but that battle is over. Now is a good time for Democrats and Secretary DeVos to cooperate on a common objective--an objective that should attract broad bipartisan political support.

So here's what I suggest: relief for elderly student-loan debtors.

Senators Claire McCaskill and Elizabeth Warren supported a bill in 2015 that would stop the federal government from garnishing the Social Security checks of elderly and disabled people who defaulted on their student loans.  The bill got nowhere.

The Senators also asked the Government Accountability Office to prepare a report on elderly Americans with student loan debt, and GAO delivered that report last December. The report was widely covered by the media and contained some fascinating information.
  • First, "[t]here has been a 10-fold increase in the amount of student debt held by people age 65 or older--from $2 billion in 2005 to $22 billion" in 2015  (quoting the Washington Post).
  • The federal government has increased efforts to garnish Social Security check of student-loan defaulters. According to Senator McCaskill's office, "The number of Americans whose Social Security checks are being garnished by the government to recoup defaulted student loans has increased by 540 percent in the last decade to over 114,000 older borrowers."
  • In 2015, 173,000 Americans had their Social Security income offset due to defaulted student loans. This is a dramatic increase from 2002, when the government only applied offsets to 36,000 Social Security recipients (page 11 of GAO report).
  • Some Social Security recipients whose income was offset lived below the federal poverty guideline and others dropped below the poverty level after their Social Security checks were reduced (p. 27 of GAO report). In fact, as Senator Elizabeth Warren emphasized in a recent press release, "Since 2004, the number of seniors whose Social security benefits have been garnished below the poverty line increased from 8,300 to 67,300."
  • More than 7 million people age 50 and older still owe on student loans, and 870,000 people age 65 and older have student loan debtAmong student-loan borrowers age 65 and older, 37 percent are in default (figure 2, page 10 of GAO report).
  • The amount of money the government collects from Social Security offsets is a pittance compared to overall student debt. The government  only collected $171 million from Social Security offsets in 2015, about $1,000 per garnishee.
  • Most of the money collected from Social Security offsets went toward paying fees and accumulated interest.  "Of the approximately $1.1 billion collected through Social Security offsets from fiscal year 2001 through 2015 from borrowers of all ages, about 71 percent was applied to fees and interest" (p. 19 of GAO report).
Surely, Senators McCaskill and Warren can muster bipartisan support for legislation that will stop the federal government from garnishing the Social Security checks of elderly student-loan defaulters. Perhaps they might ask for a couple of Senate Republicans to join as co-sponsors. I suggest Senator Lisa Murkowski of Alaska and Susan Collins of Maine. Both voted against Ms. Devos' confirmation.

And I'll bet Senators McCaskill and Warren could get Betsy Devos and the Department of Education to endorse the bill. At least they could ask.

Who would oppose such a bill? I don't think anyone would.  What a wonderful message such a law would send to the American people: the message that our elected leaders--Congress and the Executive Branch--can work together to advance the common good.

On the other hand, if Congress and the U.S. Department of Education can't cooperate to get this wholly beneficial legislation adopted, then the political process is indeed broken.




References

Sandy Baum. Student Debt: Rhetoric and Realities of Higher Education Financingg. New York: Palgrave-Macmillan, 2016.

Jordan Carney. Two GOP senators to vote no on Betsy DeVosThe Hill, February 7, 2017.

Danielle Douglas-Gabriel. The disturbing trend of losing Social Security benefits to student debt. Wall Street Journal, December 20, 2016.

Senator Claire McCaskill Press Release, December 20, 2016. McCaskill-Warren GAO Report Shows Shocking Increase in Student Loan Debt Among Seniors.

Senator Elizabeth Warren Press Release, December 20, 2016. McCaskill-Warren GAO Report Shows Shocking Increase in Student Loan Debt Among Seniors

United States Government Accountability Office. Social Security Offsets: Improvement to Program Design Could Better Assist Older Student Borrowers with Obtaining Permitted Relief. Washington DC: Author, December 2016).

Tuesday, December 27, 2016

Social Security offsets imposed on elderly student-loan defaulters: Heartless and Pointless

You can be young without money but you can't be old without it.
Tennessee Williams

If you are in your late 50s or early 60s, you've probably obtained an estimate for how much Social Security income you will receive when you retire. Most retired Americans depend on their Social Security checks to provide a significant amount of their overall retirement income. 

But if you defaulted on a student loan, you may not receive your full Social Security benefit. The government may deduct part of your Social Security income and apply the deduction to your unpaid student loans. 

A few weeks ago, the U.S. Government Accountability Office issued a lengthy report  (82  pages) on the government's Social Security offset activities. Here are some of the highlights.
  • In 2015, 173,000 Americans had their Social Security income offset due to defaulted student loans. This is a dramatic increase from 2002, when the government only applied offsets to 36,000 Social Security recipients (page 11).
  • Some Social Security recipients whose income was offset lived below the federal poverty guideline and others dropped below the poverty level after their Social Security checks were reduced (p. 27). In fact, as Senator Elizabeth Warren emphasized in a recent press release, "Since 2004, the number of seniors whose Social security benefits have been garnished below the poverty line increased from 8,300 to 67,300."
  • More than 7 million people age 50 and older still owe on student loans, and 870,000 people age 65 and older have student loan debt. Among student-loan borrowers age 65 and older, 37 percent are in default (figure 2, page 10).
  • The amount of money the government collects from Social Security offsets is small beer. The government  only collected $171 million from Social Security offsets in 2015, about one eighth the amount Hillary Clinton raised for her 2016 presidential campaign ($1.4 billion). 
  • Most of the money collected from Social Security offsets went toward paying fees and accumulated interest.  "Of the approximately $1.1 billion collected through Social Security offsets from fiscal year 2001 through 2015 from borrowers of all ages, about 71 percent was applied to fees and interest" (p. 19).
GAO also reported that several hundred thousand people who have experienced Social Security offsets are totally disabled and entitled to have their student loans forgiven, but only a minority of these people have applied for loan forgiveness (p. 31). Commendably, DOE has suspended offsets for people who are totally disabled whether or not they applied for loan forgiveness.  Unfortunately, the government treats the amount of the forgiven debt as taxable income (p. 31).

The GAO report is packed with additional information and findings, but the bottom line is this: The government is hectoring elderly and disabled student-loan defaulters even though the amount of money the government collects is a pittance. Most of the money collected goes toward paying down fees and accumulated interest and does not reduce the individual defaulters' loan balances.

In short, the Department of Education's Social Security offset practices is pointless. Elderly or disabled people who defaulted on their student loans and are surviving on their Social Security checks will never pay off their loans. 

Sandy Baum, a widely renowned expert on student loans, recommended in her recent book that the government stop offsetting the Social Security checks of defaulted student-loan debtors. Does anyone disagree? 

In fact, the government's Social Security offset practices strike me as an administrative form of sadism--the bureaucratic equivalent of small children who joylessly tear the wings off of insects.

Senator Elizabeth Warren has called for an end to the practice of garnishing student-loan defaulters' Social Security checks. Surely she can gather legislative support for a law that bans this practice. If she can't get that done, then Senator Warren is really not much of a consumer advocate.



References

Sandy Baum. Student Debt: Rhetoric and Realities of Higher Education Financing. New York: Palgrave-MacMillan, 2016.

Senator Elizabeth Warren Press Release, December 20, 2016. McCaskill-Warren GAO Report Shows Shocking Increase in Student Loan Debt Among Seniors

United States Government Accountability Office. Social Security Offsets: Improvement to Program Design Could Better Assist Older Student Borrowers with Obtaining Permitted Relief. Washington DC: Author, December 2016).