When a Loan Counts as an Asset or Income for SSI Disability

If you borrow cash or loan cash to someone else, it can affect how Social Security calculates your assets and income when you apply for or receive SSI benefits. And that can affect your eligibility for SSI or your monthly benefit amount.

SSI, or Supplemental Security Income is a federal benefit that's only available to seniors and people with disabilities who have low incomes and few assets or resources.

If you're single you can have only $2,000 in resources and still qualify for SSI. But not all assets count toward the SSI resource limit. For example, money in the bank is a resource that counts toward the limit, but your car and primary residence don't count.

The amount of income you can have and still get SSI is based on the "federal benefit rate" (FBR) which changes from year to year. For 2023, it's $914 per month for a single person. But what counts as income isn't just money you earn from a job.

Unearned income also counts toward the SSI income limit, including all of the following:

• SSDI benefits
• veterans disability compensation, and
• in-kind income (like free room and board).

But what if the support you get from someone else is just a loan? Or what if the cash you're receiving is from someone paying you back for a loan? Read on to learn how Social Security treats loans, including when they count as income or assets for SSI purposes.

How Social Security Treats Loans

For Social Security to treat cash you borrow as a loan rather than as income, both of the following must be true:

• the cash was given to you under a loan agreement, and
• the loan is "bona fide."

A loan agreement exists when a person or company lends money to someone (the borrower), and the borrower agrees to pay all the money back.

"Bona fide" means that the terms of the loan must be made in good faith and must be enforceable under state law—meaning the borrower can be sued if the loan isn't paid back. It doesn't matter whether or not the lender charges interest or whether the loan agreement is oral (spoken) or written. As long as it's enforceable in your state, Social Security considers it bona fide.

But Social Security has different rules for different types of loans when it comes to SSI eligibility and benefits.

Borrowing From Friends or Family

Social Security has special rules for informal loans (for instance, between friends or family members). For Social Security to consider an informal loan as bona fide, all of the following must be true:

• The loan agreement must be in effect when the lender gave the cash to the borrower—meaning you can't turn a gift of cash into a loan at a later date.
• Both the borrower and the lender must acknowledge the loan has to be repaid. (For example, repayment of the loan can't be conditional, depending on how the borrower is doing financially. And the borrower merely making a statement about feeling a sense of obligation to repay a person doesn't meet this requirement.)
• The loan must contain a workable plan or schedule for repayment—one that's manageable given the borrower's income and other resources. (Social Security will determine whether the repayment is feasible.)
• The borrower must state an intent to repay the loan using future income (including SSI) or with real estate or personal property.

Social Security might treat an informal cash loan as income, an asset, or neither, depending on the circumstances (more on informal loans below).

How Social Security Treats Bank Loans

If you borrow money from a bank or other commercial lender, Social Security won't consider the cash you get from the loan as income. But Social Security will consider any cash you still have from the loan in the month after you receive it as an asset.

Social Security's Rules for Student Loans

Social Security won't count federal education loans (like parent PLUS, Perkins, or Stafford loans) or any other loan made under Title IV of the Higher Education Act as income or resources (assets). Other education-related resources, such as grants, are also excluded as long as they're used for tuition and fees. Learn more about how Social Security treats educational grants, loans, and scholarships.

How Informal Cash Loans Can Affect Your SSI

Social Security might consider a loan to be income or a resource (asset), depending on the facts and whether you:

• borrow cash from someone, or
• lend cash to someone.

This means a loan could affect your SSI eligibility or payment amount. And sometimes, Social Security will disregard the value of the loan altogether. So, it's essential to understand the rules on SSI and cash loans before you borrow or lend money.

Being the Borrower: How Social Security Treats a Cash Loan

If you borrow money under a loan that counts as a bona fide agreement, Social Security won't consider the cash you get from the loan as income. But any cash you still have from the loan in the month after you receive it will be considered an asset for SSI purposes—because money in the bank is a resource you can draw on.

What if Social Security determines that the loan wasn't bona fide (for instance, Social Security finds that your parent gave you a gift of money that you don't have to pay back)? Any cash given to you will count as income in the month you received it, and if you still have the cash in the following month, it will count as an asset too.

Being the Lender: How Loaning Cash Can Affect Your SSI

If you're the lender, Social Security might treat the loan you made and the loan payments you receive as assets or not, depending on the circumstances. But under the Code of Federal Regulations Title 20 (20 CFR 416.1103(f)), the money you receive in repayment of a bona fide loan won't be treated as income.

If you loan someone money, it could affect your eligibility for SSI benefits or your payment amount. How the loan will impact your SSI depends on the following:

• whether or not the loan is enforceable under state law (a bona fide loan)
• whether it's a "negotiable agreement" (one you can "sell" to someone else), and
• whether you can use the cash you loaned (in which case, it can be considered a joint resource and will be counted as an asset).

Generally, loans are considered negotiable (sellable) unless there's some legal bar to selling the loan (or it's illegal).

When a loan counts as a resource. If you lend someone cash under a bona fide loan agreement that's also negotiable, the payments you receive from the borrower don't count as income. But the loan agreement and the repayments you receive are considered countable resources under Ruling SSR 92-8.

For example, if you lend someone $500 cash under an enforceable and saleable loan agreement, the loan is considered an asset worth $500 because you could convert it to cash by selling the loan agreement to someone else. If the borrower pays you $50 toward the loan balance, the payment isn't considered income. Instead, both the $50 payment and the remaining $450 loan balance are considered assets totaling $500.

When loan repayments might be considered income. If the loan isn't enforceable and you can't sell it to someone else (for example, you gave your child a loan to buy a car, but you don't expect to get it back), it's not considered a loan for SSI purposes. Because Social Security doesn't consider it a loan, if your child eventually pays you back some of the money, those payments are considered gifts or "income" for the month you receive them.

And like any income, if the money you received stays in your bank account, it will count as a resource, starting the month after you received it.

Loans that don't count as income or assets. What if a loan is enforceable under state law but isn't negotiable, meaning you can't sell your rights to receive the repayments? Then Social Security won't consider the loan a resource (asset) because you can't convert it into cash (by selling it) and you don't have access to the money to use for yourself.

Any loan repayments you receive for such a loan won't be treated as income—payments for an enforceable loan (sellable or not) aren't considered income. (20 CFR 416.1103(f).) But if you still have that repayment money in the bank the month after you receive it, Social Security considers it an asset (like any other money you have in the bank).

How SSI Counts Interest Payments You Receive

If you lend someone money and collect interest on the loan, Social Security will consider the interest payments as unearned income—whether or not the loan is enforceable under state law. If you receive payments that include both principal and interest, only the interest will count as income.

What Do You Need to Prove a Loan to Social Security?

Here's what you'll need to give to Social Security to prove that the cash you lent or borrowed is a bona fide loan:

• a copy of the written and signed loan agreement (make sure it's signed by both the lender and the borrower), or
• statements from both the lender and the borrower acknowledging the loan (if there's no written agreement).

Social Security will review the applicable state laws to determine whether an enforceable (bona fide) loan exists.

Have Questions About How a Loan Will Affect Your SSI?

You can contact Social Security directly if you have questions about how a cash loan might affect your SSI benefits. You can speak with a representative by either:

• calling Social Security's toll-free national number 8 a.m. to 7 p.m. Monday through Friday at 800-772-1213 (TTY 800–325–0778), or
• calling or visiting your local field office.

Learn more about the Supplemental Security Income program, including eligibility requirements and how to apply, on our SSI overview page.

_{Updated July 3, 2023}