This section provides instructions for determining when a cash loan is countable as a resource and for determining its value as a resource. This section also provides instructions for determining whether an agreement is a bona fide loan for SSI purposes. For instructions to develop loans of in-kind support and maintenance, see Loans of In-Kind Support and Maintenance SI 00835.482.
A loan is a transaction whereby one party advances money to, or on behalf of another party, who promises to repay the lender in full, with or without interest. The loan agreement may be written or oral, and must be enforceable under State law.
A negotiable agreement is (e.g., a loan) where the owner of the agreement itself can transfer it from one person to another to include the whole amount of money expressed on its face.
The cash provided by the lender is not income but is the borrower's resource if retained in the month following the month of receipt.
The cash provided by the lender is income in the month received and is a resource if retained in the month following the month it was received.
NOTE: We exclude Federal Educational Loans (Federal PLUS Loans, Perkins Loans, Stafford Loans, William D. Ford Loans, etc.) under Title IV of the Higher Education Act (HEA) and money received under certain other types of educational assistance programs from income and resources. See, Grants, Scholarships, Fellowships, and Gifts SI 00830.455B and Other Grants, Scholarships, Fellowships, and Gifts SI 01130.455C.
A negotiable, bona fide loan agreement is a resource of the lender valued at the outstanding principal balance. (For rebuttal rights, see SI 01120.220E.4. in this section.)
The cash provided to the borrower is no longer the lender's resource because the lender cannot access it for their own use; the loan agreement replaces the cash as the lender’s resource.
Payments received from the borrower against the loan principal are conversions of a resource, not income. If retained, the payments are counted as the lender's resource starting in the month following the month of receipt.
The cash provided to the borrower is no longer the lender's resource because the lender cannot access it for their own use; the loan agreement is not a resource because it cannot be transferred.
Payments received from the borrower against the loan principal are income. If retained, count the payments as the lender's resource starting in the month following the month of receipt.
NOTE: Interest income received by the lender is unearned income whether the loan is bona fide or not. If the loan payments received by the lender include both principal and interest, only consider the interest portion as income.
An informal loan is a loan between individuals who are not in the business of lending money or providing credit.
An informal loan can be oral or written.
An informal loan is “written” when the parties to the loan commit to writing the terms of their agreement.
Completing Form SSA-2854 (Statement of Funds You Provided to Another) and Form SSA-2855 (Statement of Funds You Received) does not establish a written loan. These forms merely document the parties' allegations about the loan.
An informal loan (oral or written) is bona fide if it meets all of the following requirements.
A bona fide loan is an agreement that must be enforceable under the applicable State law. Check your regional instructions.
The loan agreement must be in effect at the time that the lender provides the cash to the borrower. Money given to an individual with no contemporaneous obligation to repay cannot become a loan at a later date.
A loan is a cash advance from a lender that the borrower must repay, with or without interest. For a bona fide loan to exist, the lender and the borrower must acknowledge the obligation to repay. When money or property is given and accepted based on any understanding other than it is to be repaid by the receiver, there is no loan for SSI purposes.
A statement by the individual that they feel personally responsible to pay back the friend or relative on its own does not create a legal obligation to repay the individual who provided the cash. Similarly, the lender’s statement that the borrower must only repay the cash if they become financially able to do so does not, on its own, create a legal obligation to repay.
EXAMPLE: An applicant applies for SSI in June 2011. They have no income and allege that their adult child provided them $200 cash per month as a loan. The applicant states that they would like to use their SSI benefits if approved to pay back the loan. When contacted, the adult child of the applicant states that although they would like the applicant to repay them, the applicant does not have to repay the loan . The CR determines that a bona fide loan does not exist because there is no obligation to repay.
NOTE: The obligation to repay cannot be contingent on future income that might be paid. There must be an understanding that the borrower must pay it back for it to be a bona fide loan.
The loan must include a plan or schedule for repayment, and the borrower's express intent to repay by pledging real or personal property or anticipated future income (such as retirement insurance benefits (RIB) benefits starting in a year when they turn 62). The claimant may use anticipated income such as Title II, Title XVI, Veterans benefits, etc., to establish a plan for a feasible repayment of the loan as long as the loan states the claimant must pay the money back.
The plan or schedule must be feasible. In determining the plan's feasibility, consider the amount of the loan, the individual's resources and income, and the individual's living expenses.
NOTE: Evidence received later that the individual did not repay the loan does not negate the determination that the loan was bona fide. If it has been previously determined that a loan is bona fide, do not redevelop that issue unless the individual provided incorrect information.
EXAMPLE 1: Plan for repayment based on anticipated future trust
Claimant applies for SSI disability benefits and alleges a loan:
Claimant files for SSI on 05/13/11 and alleges their parent pays the claimant's rent of $300 each month.
The claimant states that they must pay the parent back. You contact the parent and they state that they have been paying the claimant’s rent since 01/01/11 and the claimant must pay back the loan.
The claimant also states that they will inherit $6,000 from their grandparent’s estate when the claimant turns 21. They will be 21 on December 09, 2011 and plan to use this money to pay the parent back.
Both parties confirmed that repayment was not dependent on whether the claimant’s financial situation improved, and
The repayment plan is feasible because the claimant intends to use anticipated money from the trust to pay back the loan. NOTE: The trust is an excludable resource until claimant turns 21.
EXAMPLE 2: Feasible loan repayment based on anticipated benefits
Claimant applies for SSI disability benefits and alleges a loan:
Claimant files for SSI on 05/13/11 and alleges their parent pays the claimant's rent of $300 each month.
The claimant states that they must pay the parent back. You contact the parent and they state that they have been paying the claimant’s rent and the claimant must pay back the loan.
The claimant also states that they hope they are approved for SSI so they can use the money to pay back the loan.
Both parties confirmed that repayment was not dependent on whether the claimant’s financial situation improved, and
The repayment plan is feasible because the claimant intends to use anticipated SSI benefits to pay back the loan.
Follow these procedures to determine whether an informal loan is bona fide and to determine the resource value, if any, for the individual.
If the eligible individual is the lender, document the loan allegation by completing the Promissory Note, Loan, or Property Agreement page in the SSI Claims system.
If the eligible individual is the borrower, document the loan allegation by completing the SSI Claims system page appropriate to the proceeds being held (e.g., Cash or Financial Institution Account pages) and briefly describe the loan in Remarks.
For cases not in the SSI Claims system, document the loan allegation per Statements and Other Documentation GN 00301.285 through Evidentiary Documentation Considerations GN 00301.289.
If there is a written agreement between the parties, fax a copy of the agreement to the Non-Disability Repository for Evidentiary Documents (NDRED) using the Evidence Portal (EP), or record the pertinent information on the EVID screen.
If there is no written agreement, or the written agreement does not cover the requirements in subsection D, obtain statements either signed or recorded on a Report of Contact from the borrower and the lender.
You may use forms SSA-2854 and SSA-2855 to obtain the signed statements; store the forms or statements in EP. If you use a Report of Contact, include all the information contained on forms SSA-2854 and SSA-2855. For more information about SSA-2854 and SSA-2855, see SI 01120.220G in this section.
NOTE: These forms do not establish a “written” loan. The forms document the parties' allegations about the loan.
After consulting any regional instructions for applicable State law, determine whether the loan is bona fide under the criteria in section D.
REMINDER: If the loan is bona fide, the cash proceeds are not income to the borrower but are a resource if retained until the following month. For the lender, the loan agreement itself is a resource if it is bona fide and negotiable. The borrower’s repayment of principal is not income to the lender, but the interest portion is unearned income.