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

When Social Security treats loans as income or resources for SSI eligibility purposes.

If you borrow cash, or if you loan cash to someone else, the way the SSI program calculates your assets and income can be impacted and can affect your eligibility for SSI. (SSI stands for Supplemental Security Income, a federal benefit available to low-income and low-asset people who are elderly or meet the Social Security Administration’s (SSA) definition of disabled.) If you are single you can have only $2,000 in assets and still qualify for SSI. The amount of income you can make and still get SSI often changes from year to year and state to state.

How the SSA Treats Loans

For the SSA to treat cash you receive as a loan rather than as income, the cash must have been given to you under a loan agreement and the loan must be 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.

Generally, bona fide means that the terms of the loan must be made in good faith and must be enforceable under applicable state law (the borrower can be sued if the loan isn't paid back). It doesn’t matter whether the lender charges interest or whether the loan agreement is oral (spoken) or written.

If you are the lender, the loan and loan payments could be treated as assets or not, depending on the circumstances, but the loan repayments are always treated as income.

Let's look at how the SSA treats various types of loans.

Student Loans

The SSA will not count federal education loans (like parent PLUS, Perkins, or Stafford) or any other loan made under Title IV of the Higher Education Act as income or resources (assets). Certain other education-related resources such as grants may be excluded as well, as long as they are set aside for tuition and fees.

Bank Loans

If you borrow money from a bank or other commercial lender, the SSA will not consider the cash you get from the loan as income. However, whatever cash you still have from the loan in the month after you received it will be considered an asset.

Informal Cash Loans

There are special rules for informal loans (for instance, between friends or family members) to be considered bona fide; all of the following must be true.

  • The loan agreement must have been in effect when the lender gave the cash to the borrower (this means you can’t turn a gift of cash into a loan at a later date).
  • Both the borrower and the lender must acknowledge that the loan has to be repaid. (Statements by the borrower about a sense of obligation to repay a person doesn’t meet this requirement; also, the repayment cannot be conditioned on the borrower’s financial status), and
  • The borrower must state his or her intent to repay the loan using real estate or personal property or must anticipate future income (including SSI).
  • The loan must contain a feasible plan or schedule for repayment. (A feasible repayment plan is one that is manageable given the borrower’s income and other resources. The SSA will determine whether the repayment is feasible.)
There are special rules that decide when an informal cash loan will be treated as income, assets, or neither.

When Informal Cash Loans Are Income or Assets

Depending on the facts, and whether you borrow cash or lend it, the SSA may consider the loan to be either income or an asset (what the SSA calls a resource). This means that your eligibility for SSI or your SSI payments can be impacted. But sometimes the SSA might disregard the value of the loan altogether. For these reasons, it is important that you understand the SSA’s rules on cash loans before you borrow or lend money.

If You Are the Borrower of a Cash Loan

If you borrow money under a loan that counts as a bona fide agreement, the SSA will not consider the cash you get from the loan as income. However, whatever cash you still have from the loan in the month after you received it will be considered an asset.

If the SSA concludes that the loan you borrowed money under was not bona fide (for instance, the SSA finds that your parent gave you a gift of money that you don't have to pay back), the cash given you will be counted as income in the month you received it and it will be counted as a resource if you still have the cash in the following month.

If You Are the Lender of a Cash Loan

If you loan someone money, your eligibility for benefits may be affected; the specific way it will be impacted depends on whether or not the loan is bona fide and whether it is a "negotiable agreement." A negotiable agreement is one where the lender can “sell” the loan to someone else. The person who “buys” the loan can begin to collect payments on it. Generally loans are negotiable (saleable) unless the the loan is illegal or there is some other legal bar to the loan being sold.

If the Loan Is Both Bona Fide and a Negotiable Agreement

If you lend someone cash under a bona fide loan agreement, and that agreement is also negotiable, the amount of the loan owed to you counts as your resource (asset). Technically, the actual cash you loaned to the borrower isn’t considered a resource, because you no longer have access to it, but the payments you will receive against the original loan amount are considered resources, beginning with the month after you receive the payment. Note that the loan repayments aren't considered income in the month you receive them.

If the Loan is Neither Bona Fide Nor Negotiable

If the loan isn't bona fide or negotiable (for example, you gave your child a loan to buy a car, but you don't expect to get it back), the loan isn't considered a resource because you can't sell the loan to someone else. However, any payments you get against the original loan amount are considered income. And like any income, if a loan repayment stays in your bank account, it will be counted against you as a resource, starting the month after you received it.

Also, it's important to know that you can use or access the cash you loaned to someone else, it can be considered a joint resource (and therefore counted against you as an asset).

If the Loan Is Bona Fide but Non-Negotiable

Similarly, if the loan isn't negotiable, meaning you couldn't sell your rights to receive the repayments, the load and the repayments from the loan aren't considered assets because you can’t sell the loan. Also, the cash you loaned to the borrower isn’t a resource, because you don’t have access to it to use for yourself. However, the repayments you get against the loan amount are considered income. Also, any money you keep from the repayment is considered your resource and is counted against you the month after you receive it.

Interest Payments

If you are collecting interest on the loan, it is considered unearned income to you, regardless of whether or not the loan is bona fide. If you get combined principal and interest payments, only the interest will only be counted as income.

Evidence Needed to Prove the Existence of a Cash Loan

Here are is what you will need to give to the SSA to prove the existence of a cash loan:

  • a copy of the written and signed document (make sure it is signed by both the lender and the borrower), or
  • if there isn’t a written agreement, statements from the both the lender and the borrower.

The SSA will review the applicable state laws to determine whether a bona fide loan exists.

Contact the SSA With Questions

You should contact the SSA directly if you have questions about how a cash loan might affect your benefits. You can call them Monday through Friday at 800-772-1213. You can also meet with someone in person at your local field office, but make sure you call the toll free number first to see if you need an appointment. You can find your local field office here: https://secure.ssa.gov/ICON/main.jsp

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