Q:

Can loans be forgiven if you are on social security?

A:

Quick Answer

Although loans are not automatically forgiven when borrowers are on Social Security, people on Social Security may not have to pay back certain loans if Social Security is their main source of income, reports Forbes. On the other hand, federal agencies can sometimes garnish Social Security benefits to collect debts on federal loans, according to the Social Security Administration.

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Full Answer

Social Security benefits are protected from most debt collection, but federal agencies can garnish Social Security payments up to 15 percent to pay off student loan debt, according to Bankrate. However, if borrowers fully dependent on Social Security opt for a federal student loan repayment program that is income-contingent, they do not have to make loan payments because Social Security benefits are not counted as part of adjusted gross income, explains Forbes. The loan does not go away, though, and interest continues to accrue, points out MarketWatch.

The Debt Collection Improvement Act of 1996 made it easier for government agencies to garnish Social Security benefits to collect debt, notes MarketWatch. In 2014, the federal government docked the Social Security benefits of approximately 155,000 people to pay for student loans, reports Forbes. Social Security also withholds benefits to pay delinquent federal tax debts, restitutions, child support, alimony and other debts owed to federal agencies, according to the Social Security Administration.

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