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Disability and student loans?

My roommate is under the impression that if you owe student loans, the student loans people can legally take all your paycheck, all your disability if you're on it, all your tax returns, and can even legally take all the tax returns of your spouse if you get married, and so she has decided not to bother trying to apply for disability because of this. I don't know whether to believe it or not, because that sounds not only highly illegal, but extremely unethical. I doubt it's legal to take someone's entire income for a debt they owe. (USA)

This was cross-posted from http://fayanora.dreamwidth.org/1254314.html
You can comment either here or there.


( 4 comments — Leave a comment )
Oct. 10th, 2014 06:26 pm (UTC)
Oct. 10th, 2014 11:00 am (UTC)
If you OWE student loans, you're supposed to set up a payment arrangement; there are many types of these. If you DEFAULT on paying back the loans, then one of the agencies responsible for student loans can "garnish" your wages and/or benefits, but they cannot take ALL your money - they have to leave you a minimal amount to live on. Your tax refunds, state and/or federal, if any, can be applied to the loan balance before you ever see them. If you win a prize in a state lottery, ditto. And in no case can they ever take more than what you owe. Furthermore, there are circumstances (such as disability!) that can be used to obtain "forgiveness" of the debt, but they operate at the whim of a judge. Student loans, past-due Federal income taxes, and unpaid child support are the only kinds of debt you cannot get rid of via bankruptcy.

As you can tell from bart_calendar's link, it's very complicated. Your roommate needs a financial advisor who specializes in student loans. I went through this myself some years ago - the loans my son was eligible for didn't cover his tuition, so my husband and I took out student loans in our names, but assigned on his behalf to the college he was attending. It was a grueling, complex, and often humiliating process, but in the end we struck a bargain that we'd pay the "collection agency" (a lawyer authorized by the state) a token payment of $100/month until we could pay more than that. That doesn't even keep up with the interest, so the total amount keeps growing. Eventually there'll be a law passed to forgive such ancient loans, or some other law, or we'll start making a lot more money and pay them off, or we'll both die, in which case the debt dies with us. (At least they don't hold a debtor's heirs responsible - even if the loans were for the heir's education.)

Basically, she needs professional advice. Which doesn't necessarily have to cost her anything, or only a symbolic fee.

Edited at 2014-10-10 11:03 am (UTC)
Oct. 10th, 2014 06:34 pm (UTC)
Wow, it's absurd how much they *can* do. Ugh.

What really gets me about my roomie's situation is, her parents are wealthy enough where they could pay off her student loans for her in totality and still be obscenely rich, but these people make the Dursleys look pleasant and generous by comparison, so even if Hell froze over, I wouldn't hold my breath waiting for them to help her.
( 4 comments — Leave a comment )


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