Top court sides with feds in delinquent loans case

~ No more than 15 percent can be taken from benefit checks.

WASHINGTON -- America's seniors and disabled cannot escape debts from old student loans, the Supreme Court ruled Wednesday, freeing the government to pursue Social Security benefits as part of an effort to collect billions in delinquent loans.

The Bush administration had argued that the ability to withhold Social Security benefits is an important tool in the pursuit of $5.7 billion in student loan debt that is more than 10 years old. Overall, outstanding loans total about $33 billion.

Government lawyers said there is a limit on how much can be taken from benefit checks, 15 percent, and that the Education Department can forgive debts in some hardship cases.

The unanimous decision went against a disabled 67-year-old Seattle man who lives in public housing and had sued claiming he needed all of his $874 monthly check for food and medicine.

James Lockhart's benefits had been cut by 15 percent to cover debts he incurred for college in the 1980s. He has about $77,000 in unpaid loans.

The court's decision applies to loans that date back more than 10 years, and covers both disability and retirement benefits under the Social Security program.

Senior citizens groups did not know how many elderly or disabled people could lose some of their monthly checks if the government decides to go after them.

"It means that you can take the Social Security benefits of someone who is 90 years old and living on a small amount of money," said Brian Wolfman, director of the Public Citizen Litigation Group and the lawyer for Lockhart. "The losers are clearly older Social Security beneficiaries."

Lockhart lost earlier at the San Francisco-based 9th U.S. Circuit Court of Appeals, which said that Congress, in laws passed in 1991 and 1996, eliminated a 10-year time limit on the government's right to seek repayment on defaulted student loans by seizing Social Security. The justices affirmed that decision.

Other lower courts, however, have ruled in favor of Social Security recipients, and Wolfman said that Congress could reconsider the issue.

The Supreme Court was called on to clarify federal laws that sent conflicting messages about the collection of old loans. The government first began withholding the money from Social Security benefits in 2001 and has defended its authority to do so in court.

The ruling, written by Justice Sandra Day O'Connor, will probably be one of her last. She is retiring after 24 years.

In a concurring opinion, Justice Antonin Scalia said that Congress "unambiguously authorized, without exception, the collection of 10-year-old student loan debt. ... In doing so, it flatly contracted and thereby effectively repealed part of the Social Security Act."

Groups such as the AARP and the National Consumer Law Center had urged the court to safeguard Social Security benefits in the Lockhart case. The benefits, the organizations said, "are critical in preserving a measure of financial independence for older and disabled workers."

Also Wednesday, new Chief Justice John Roberts announced his first ruling, in a case involving legal fees. The 9-0 decision backed insurance companies, which argued that they should not have to pay legal fees of a New Mexico couple in a case that was shuffled from state court to federal court, then back to state court.

The student loan case is Lockhart v. U.S., 04-881, and the lawyer fees case is Martin v. Franklin Capital Corp., 04-1140.

On the Net

Supreme Court opinion in Lockhart v. U.S.:

wid.ap.org/documents/scotus/051207lockhart.pdf