Superseded 1992

Superseded by SSR 92-8

SSR 78-26: Treatment of Loans for Supplemental Security Income Purposes: Income or Resources

SSR 78-26


To provide clarification of policy with respect to when proceeds of a loan are (1) not countable income for Supplemental Security Income (SSI) purposes, and (2) when they are considered a countable resource under the SSI program.


Sections 1611 and 1631(e)(1)(B) of the Social Security Act, as amended; Regulations No. 16, Sections 416.1102 and 416.1201.


Existing regulations define income as ". . . the receipt by an individual of any property or service which he can apply, either directly or by sale or conversion, to meeting his basic needs for food, clothing and shelter." A resource is defined under regulations as ". . . cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his support and maintenance. If the individual has the power to liquidate the property, or his share of the property, it is considered a resource. . . ."

When an individual borrows and receives money through a lending process, as a borrower, or receives money as repaying on an outstanding loan (lender), a determination must be made whether such money is considered a resource or income for SSI eligibility and payment purposes. Since inception of the SSI program, proceeds of a loan have not been considered income to the borrower because of the obligation to repay. Existing regulations do not spell this out. Similarly, since inception of the SSI program, outstanding loans made by an SSI applicant or recipient from money available to him/her have been considered a countable resource to the extent there has been a negotiable instrument showing existence of a loan agreement. This is because a negotiable instrument is convertible to cash and, therefore, meets the definition of a resource for SSI purposes. In such a case, the negotiable instrument would be a countable resource to the lender.

Existence of negotiable instrument, however, is not the sole criterion of a bona fide loan. The interpretation of a bona fide loan for SSI purposes is that where a borrower receives money (from relatives, friends or others) a loan is created if there is an understanding between the parties that the money borrowed is to be repaid and it is recognized as an enforceable contract under State law. The transaction which creates a loan can be in the form of a written or oral agreement if enforceable under State law. Absent a negotiable instrument, a bona fide loan must still be convertible to cash in order to be considered a resource for SSI purposes.


For purposes of determining when a loan is not considered income and when a loan is considered a countable resource under the SSI program, the following policies apply:

  1. A loan means an advance of money from lender to borrower where borrower has to repay, with or without interest. This applies to any commercial as well as noncommercial loan (between relatives, friends or others) that is recognized as enforceable under State law. The loan agreement may be oral or written, as long as it is enforceable under State law.

  2. Monies received, which meet the above definition of a loan, are not income to the borrower (SSI applicant/recipient) for SSI purposes since such funds are subject to repayment. Any portion of such funds not spent by the borrower are a countable resource to the individual (borrower) if retained into the quarter following the quarter of receipt.

    (However, in initial application situations, if application for SSI benefits is made in the second month of the quarter, money received in that month which is retained is considered a resource in the month following the month of receipt (i.e., third month of the quarter)).

  3. Where money is given and accepted on any understanding between parties, other than that it is to be repaid by the receiver of the money, there is no loan involved for SSI purposes. Such money could be a gift, support payments, etc., and must be treated accordingly (i.e., as provided in rules applicable to such items).

  4. If there is a bona fide loan as defined in (1) above, a rebuttable presumption is created that the loan meets the definition of a resource and it is a countable resource to the lender unless the presumption can be rebutted.

    For example, an SSI claimant (lender) reports an outstanding loan (based on an oral agreement) made to a relative (borrower). In this particular State such agreements are enforceable. Accordingly, the loan is presumed to be a resource to the lender because it can be converted to cash if the lender calls for repayment from the borrower. However, should the borrower die without leaving an estate, the lender can rebut the presumption of a countable resource by showing that the loan can no longer be converted to cash.

  5. Money received by the lender as repayment of a loan (which meets the definition of a resource) reduces the outstanding loan balance and is considered a countable resource to the lender inasmuch as the repayment amount represents a return of part of the loan principal; i.e., the total value of the resource, which is the repayment amount plus the outstanding loan balance, remains unchanged.

  6. Interest on a loan is counted as unearned income to the lender in the quarter of receipt and, if retained, as a resource as in (2) above.


Evidence must be obtained with respect to the existence of a bona fide loan agreement. The burden of proof with respect to the bona fide nature of the loan is with the claimant. As with other legal questions, questionable loan situations will be referred to the appropriate regional attorney.


Claims Manual Sections 12335, 12349ff, 12502, and 12521.3

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