Ask Laz: Are Social Security checks safe if you cosign a student loan?

If you cosign a student loan, your Social Security checks can be garnished under certain circumstances.
(Los Angeles Times)

James is in a sticky situation. He and his wife cosigned for their daughter’s $90,000 private student loan. Now their daughter is having trouble repaying the debt.

The lender, not surprisingly, is coming after James and his wife for the payments. James wants to know if the company can garnish their Social Security and annuity payments.

At one level, this story highlights an issue I’ve cited numerous times in the past -- the danger of cosigning for a loved one’s loans. It might seem like a kind gesture, but it can come back to bite you.

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A cosigner is legally obligated to make good on payments if the main loan recipient isn’t coming through with cash. Failure to pay places you in financial jeopardy.

Here’s what you need to know, James: Banks and private creditors can’t garnish your Social Security checks to recover a student loan. Only Uncle Sam can do that, and only if it’s a federal student loan.

And good news on the annuity front: In most cases, a private creditor can’t touch that either.

This doesn’t preclude the creditors from filing a lawsuit and trying to recover their money in the courts, but that can be expensive and thus may not be something they would rush into.


But remember, a deal’s a deal. You agreed to cover the loan if your daughter couldn’t make good. That obligation still rests with you.

I suggest you contact the lender and discuss a payment plan that works for you. Then have a little chat with your daughter about responsibility.

If you have a consumer question, email me at or contact me via Twitter @Davidlaz.