Lockhart, James v. U.S., et al. (12/07/2005)

Question presented: Whether the Department of Education can collect defaulted student loans by offsetting a portion of a debtor's Social Security benefits without regard to the ten-year limitation period under the Debt Collection Act, 31 U.S.C. 3716(e)(1), given that Congress has expressly abrogated all otherwise applicable statutes of limitations for the collection of student loans?

BY ALISON LAPP, MEDILL NEWS SERVICE

After three years of unemployment, James Lockhart decided to enroll in college courses but needed to take out federal student loans to do so.

Though he used the loans to attend at least four institutions of higher education between 1984 and 1990, the disabled Washington man was never able to find steady employment. Instead, he underwent double bypass heart surgery in 1999 that left him dependent on six prescription medications.

Until his 65th birthday in July 2003, Lockhart used the $874 he received in monthly Social Security disability benefits to pay for those medications and the medical supplies he requires for his diabetes, among other necessities. When he turned 65, Lockhart began receiving old-age benefits in place of the disability benefits.

By March 2002, Lockhart had amassed more than $80,000 in student loan debts, which he had owed to the federal government for more than 10 years. Also by this time, he learned that the government would be withholding up to 15 percent of his monthly Social Security checks to pay down the debt, using a measure known as administrative offset.

Representing himself without the help of legal counsel, Lockhart filed a complaint in the U.S. District Court for Washington on March 20, 2002. He sought an injunction that would prohibit the federal government from offsetting his Social Security benefits.

The district court dismissed the claim, saying it did not have the authority to hear this particular type of case and that Lockhart had not stated a claim on which it could grant the injunction. It entered judgment on June 4, 2002 – 34 days after the government began offsetting Lockhart's benefits.

Lockhart appealed to the 9th Circuit Court of Appeals, which ordered that a lawyer be appointed to help him state his claim. In unanimously affirming, the 9th Circuit recognized Lockhart's claim that federal statutes forbid the government from withholding Social Security benefits as repayment for student loan debt that has been outstanding for more than ten years as a legitimate basis for suit but rejected it as a matter of law.

The court found that legislators had intended for the government to be able to offset Social Security benefits to collect on student loans, no matter how long ago the money had been borrowed.

At issue are two laws – the Higher Education Act and the Debt Collection Act – that seem to contradict one another over the question of whether Social Security payments are protected from administrative offset.

"A puzzle has been created by the codifiers," Judge John Noonan wrote of the two acts, in the court's opinion on the case.

Congress amended the Higher Education Act in 1991 to do away with the previously existing 10-year limit on the government's ability to withhold payments from people with outstanding loans, as a means to collect on those loans.

The amendment did not originally apply to Social Security payments because the Debt Collection Act included an exception that made them off-limits to offset. Congress changed that law in 1996 to allow the withholding of Social Security benefits, but it did not touch another provision that set a 10-year time limit just for seizing Social Security payments.

Lockhart argued that Congress purposefully left the Social Security statute of limitations in place, whereas the U.S. argued that Congress overlooked it but intended to remove it.

Both parties agreed that it was important for the U.S. Supreme Court to resolve the issue because there was no clear standard for lower courts to follow. While the 9th Circuit found that the government may offset Social Security benefits to obtain repayments on student loans borrowed more than ten years earlier, the 8th Circuit found exactly the opposite in August 2004 in Lee v. Paige.

If the matter is not resolved, "two otherwise identically situated Social Security recipients may receive different monthly allotments depending upon whether they live in Alaska or Arizona, on the one hand, or Missouri or Minnesota, on the other," Brian Wolfman, who represents Lockhart, argued.

Both sides also claimed that the scope of the case warranted Supreme Court review. Former students owe the federal government nearly $7 billion in delinquent debt, according to the government's Supreme Court filing. More than half of that figure is made up of debt that has been due for more than 10 years.

"Subjecting Social Security offsets to a 10-year limitation period … significantly reduces the effectiveness of an important collection mechanism," Acting U.S. Solicitor General Paul Clement wrote.

Wolfman countered that many Americans would be adversely affected by a finding for the government.

"Approximately one of every six Americans … receives Social Security benefits. One-third of those recipients depend on Social Security payments for all or virtually all of their income," Wolfman claimed.

Given that 18 percent of the American population reports having outstanding student debt, the 9th Circuit's decision threatens "the ability of some of the most impoverished Americans to meet their daily needs," Wolfman said.

On April 25, 2005, the U.S. Supreme Court agreed to hear the case.

On Dec. 7, 2005, the Court affirmed, holding unanimously that the federal government may offset Social Security benefits to collect a student loan debt. In an opinion written by Justice Sandra Day O'Connor, the Court resolved the apparent conflict between Debt Collection Act and the Higher Education Technical Amendments by finding that the plain meaning of the amendments is to be given effect even though Congress may not have foreseen all of its consequences. The amendments clearly eliminated time limitations on suits to collect student loans.

Justice Antonin Scalia penned a concurrence that concluded that Congress "unambiguously authorized, without exception, the collection of 10-year-old student-loan debt by administrative offset of Government payments."