Starting from January 1940, the Social Security Administration (SSA) has been providing regular monthly payments to specific recipients, primarily focusing on retired individuals.
Receiving Social Security benefits is contingent upon meeting specific requirements, including possessing a valid Social Security Number (SSN) and satisfying credit, earnings, and retirement age criteria.
Impact on Social Security Payments
In terms of credit scores, although they do not directly impact Social Security payments for Americans, the presence of outstanding debt can potentially have repercussions.
The US government generally upholds the notion that federal payments are safeguarded from creditors, except in cases where the debt is owed to the government itself. If an individual has outstanding taxes or owes money to the federal government, they can take action to garnish up to 15% of their payments.
Similar rules apply to federal student loan repayments, with court-ordered alimony or child support payments being subject to garnishment of up to 65%.
Growing Concern for Retirees
A few years ago, The Wall Street Journal released a concise video shedding light on the predicament faced by seniors who experienced reductions in their Social Security benefits due to the deduction of student loan debt.
Considering the significant increase in balances for Generation Xers and Millennials, it is anticipated that the number of retirees burdened with student debt will continue to rise.
While Social Security benefits are generally protected from creditors, certain exceptions exist that may put those benefits at risk. One such exception is when an individual transfers their Social Security funds to a separate bank account. If this occurs, those funds may lose their protected status and become subject to creditor claims.
Another exception is when an individual receives their benefits but fails to spend them within two months of receipt. In such cases, the unspent benefits may also become vulnerable to creditor claims.
The laws governing benefits and creditor protection can be intricate and change depending on the situation, so it’s crucial to be aware of this.
As such, it’s strongly recommended that anyone facing potential creditor claims seek the advice of a qualified attorney who can provide comprehensive information and guidance on how to protect their benefits.
Read more: Student Loan Cancellation Update: Relief Options And Payment Resumption Date
