Thursday, December 08, 2005

U.S. Supreme Court decides student loan case: bad news for those with delinquent loans

Lockhart v. United States, concerned the government's withholding of social security payments as an offset to amounts owed on Lockhart's student loans. Lockhart had failed to repay federally reinsured student loans that he had incurred between 1984 and 1989 under the Guaranteed Student Loan Program. These loans were eventually reassigned to the Department of Education, which certified the debt to the Department of the Treasury through the Treasury Offset Program. In 2002, the Government began withholdings portion of Lockhart's Social Security payments to offset his debt, some of which was more than 10 years delinquent. Lockhart sued in Federal District Court, alleging that under the Debt Collection Act 10-year statute of limitations, the offset was time barred.

The crux of the case was that a 1996 federal law included Social Security benefits for the first time among the benefits that the government can attach for the repayment of debts. The original Social Security Act had barred any attachment of Social Security payments. The Court held that a 1991 law eliminated the 10-year time limit for collecting student loan obligations and therefore the social security payments could be withheld.

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