Social Security, tax refunds are fair game

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Social Security, tax refunds are fair game

May 6, 2007

BY DAVE NEWBART Staff Reporter

Twenty years ago, after he was laid off, Larry Jones took out a $1,800 loan and enrolled in Triton College.

But he developed kidney problems and dropped out. As the years passed, his disease became so bad he did home dialysis four times a day, and was hospitalized with other illnesses.

Now the loan has now come back to haunt Jones, who recently began receiving Social Security after years of receiving welfare and federal disability payments.

The U.S. Education Department wants him to pay back the loan, which has grown to $8,800. So, it reduced his Social Security check to $750 a month.

"It hurts," said Jones, of Oak Park. "I have to watch every dollar that I have."

The Education Department is one of the toughest debt collectors around -- and it has extraordinary powers. It can take a tax refund as well as garnishee wages, Social Security benefits and federal disaster payments -- all without a court order.

It also allows collection fees as high as 25 percent of the loan balance.

Department officials say the provisions are necessary. Spokeswoman Jane Glickman said students are told "every step of the way" that they have to pay back their loans.

"If you choose to drop out, it doesn't mean you don't owe the government money," Glickman said.

Nationally, nearly one-quarter of dropouts with loans default, according to the National Center for Public Policy and Higher Education.

Mandy Green, 68, who lives in a subsidized senior citizens home on the South Side, withdrew from Chicago State University after a death in the family 20 years ago. The Education Department has threatened to reduce her only income -- a $1,000 Social Security check -- by 15 percent if she doesn't pay back her loan balance. It originally was $5,000; now it's $12,000.

"I sure can't pay it," she said.

(http://www.suntimes.com/news/education/372681,CST-NWS-LOANCOLLECT06.article)