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Ruling Permits Gov...t Use of Benefits to Pay For Student Loan Debts

By Linda Greenhouse

The Supreme Court ruled unanimously Wednesday that the government may withhold Social Security benefits in order to collect old student loan debts.

The decision gives the government an enhanced tool for collecting billions of dollars in student loans by making it clear that a 10-year time limit on the government’s ability to collect debts through a process known as administrative offset does not apply to student loan debts.

The case had been brought by a man in Washington State who owed more than $87,000 in 15-year-old student loans when the government began taking $93 a month out of his Social Security disability payments.

A 1996 federal law included Social Security benefits for the first time among the benefits that the government can attach for the repayment of debts. The original Social Security Act, in 1935, had barred any attachment of Social Security payments, as a way of protecting them from debt collectors. The 1996 law shields the first $9,000 of annual Social Security income.

The question for the court on Wednesday was how far back the 1996 law reached, and the answer depended on unraveling four related federal statutes, each dealing with a piece of the puzzle.

The first was the Social Security Act itself. The second was a 1982 law that established the administrative offset procedure, while generally prohibiting its use for debts that were more than 10 years old. The third was a law passed in 1991, the Higher Education Technical Amendments Act, which made statutes of limitation inapplicable to student loan debts.

At that time, Social Security payments were still off limits for use in collecting student loan debts. The 1996 law, the Debt Collection Improvement Act, extended the administrative offset program to student loans, without mentioning the 10-year time limit or its partial abolition by the 1991 law. The plaintiff in this case, James Lockhart, argued that the limit was therefore still in effect.

Justice Sandra Day O’Connor’s opinion on Wednesday explained why the court agreed with the federal government that the limit did not apply. The decision in Lockhart v. United States, No. 04-881, upheld a ruling last year by the United States Court of Appeals for the Ninth Circuit, in San Francisco.

Justice O’Connor said it was clear that the 1991 law eliminated the 10-year time limit for collecting student loan obligations. The fact that the Social Security offset was not yet authorized at that time made no difference for the law’s future applicability, she said, adding a quotation from an earlier Supreme Court opinion: “The fact that Congress may not have foreseen all of the consequences of a statutory enactment is not a sufficient reason for refusing to give effect to its plain meaning.”

According to the government’s Supreme Court brief, the student loans now in default amount to $33 billion, $5.7 billion of which have been outstanding for longer than 10 years. “Social Security offsets to collect loans over 10 years old constitute an integral part” of the government’s collection efforts, the brief said.

The government also collects unpaid loans by withholding tax refunds and taking other government benefits. A brief filed on Mr. Lockhart’s behalf by groups including the National Consumer Law Center and AARP said that while Social Security offsets account for a small portion of the money the government collects, “they are huge for the most vulnerable Social Security recipients.”

The court on Wednesday also issued the first opinion written by Chief Justice John G. Roberts Jr. He wrote the opinion for a unanimous court in a case argued less than a month ago, Martin v. Franklin Capital Corporation, No. 04-1140.

Not destined for any list of the term’s most important cases, it raised the question of the circumstances under which a judge could order one side to pay the other’s lawyer fees in civil cases that prove to have been improperly transferred from state court to federal court. The answer depended on the “reasonableness” of the transfer, the opinion concluded; if the side that made the transfer lacked an “objectively reasonable basis” for doing so, it could be required to compensate the other side for its trouble.

While this is the sort of case that a busy justice would routinely turn over to a law clerk, Chief Justice Roberts included a few touches that were, most likely, completely his own. One was a citation to a 1982 law review article by Henry J. Friendly, the appeals court judge for whom he clerked. Another was a citation to an opinion from 1807 by Chief Justice John Marshall, which the new chief justice, tongue perhaps slightly in cheek, referred to as “good authority.”