SSDI Overpayment Waiver in 2026: The Section 204(b) Test, Form SSA-632, the New 10 Percent Recovery Cap, and the $1,000 Streamlined Waiver Path

Published June 11, 2026 by Anthony Albert, Benefits Research Director

You open a letter from SSA and it says you've been overpaid. The number is huge. $18,400. $42,100. Sometimes more. The notice tells you to pay it back in 30 days or SSA will start withholding your check. Your stomach drops. You wonder how this happened, whether it's a mistake, and whether you can lose your benefits over it.

Take a breath. SSA issued more than 1 million overpayment notices in fiscal year 2024 alone, and a huge share of those are wrong on the facts, were caused by SSA's own delays in processing earnings reports or work activity, or are eligible to be waived entirely. Then-Commissioner Martin O'Malley acknowledged the problem in March 2024 and announced four major policy changes that significantly improved beneficiary protection. Those changes are still in effect in 2026 and they have changed the playbook.

This piece walks through the legal authority for SSDI overpayments, the three paths to relief (challenge the fact and amount, request a waiver, request a payment plan), how Section 204(b) and Form SSA-632 work, the new 10 percent default withholding cap, the $1,000 streamlined waiver, how to stop collection while the waiver is being reviewed, and how to appeal a denied waiver. The piece ends with two worked examples from California and Texas showing how this plays out in real cases.

What Is an SSDI Overpayment?

An overpayment happens any time SSA pays you more than you were entitled to in a given month. The most common causes:

• Earnings above SGA. You worked, your earnings crossed the substantial gainful activity threshold, and SSA didn't process the wage match for 12 to 30 months. Once they catch up, every month you were over SGA after your trial work period and grace months becomes an overpayment.
• Failure to report work. Same scenario, but you didn't report on time and SSA caught it later.
• Medical improvement. SSA conducted a CDR, found medical improvement, terminated benefits, but you received payments after the cessation date while the appeal was pending or until the cessation was actually effectuated.
• Workers' compensation offset. You received state workers' comp benefits that should have reduced your SSDI under 42 USC 424a, and SSA didn't apply the offset until later.
• Dual benefits. You started receiving retirement, government pension, or another offsetting benefit and SSA didn't immediately reduce your SSDI.
• Administrative errors. SSA paid the wrong amount because of typing errors, miscoded records, or system glitches.
• Auxiliary benefit errors. A child or spouse on your record was overpaid because of unreported life changes (graduation, marriage, etc.).

The statutory authority for SSA to recover overpayments comes from Section 204(a) of the Social Security Act, codified at 42 USC 404(a). The procedures for recovery and waiver are at 20 CFR 404.501 through 404.515 for Title II (SSDI) and at 20 CFR 416.550 through 416.590 for Title XVI (SSI).

The Three Paths to Relief

When you get an overpayment notice, you have three options, and you can pursue more than one at the same time.

These three paths are not exclusive. You can challenge the fact AND request a waiver AND ask for a different recovery rate all at once. Many representatives do exactly that to maximize protection. The reconsideration challenges whether the overpayment happened. The waiver argues you shouldn't have to pay even if it did. The compromise sets a manageable rate if both of those fail.

The Waiver Test: Section 204(b)

The core statutory authority for waiver is Section 204(b) of the Social Security Act, codified at 42 USC 404(b). The statute says SSA shall not recover an overpayment if the person is "without fault" AND recovery would either "defeat the purpose of this subchapter" OR be "against equity and good conscience." The implementing regulations are at 20 CFR 404.506 through 404.512. POMS GN 02250 lays out the operational procedures.

So the test has two prongs. Both prongs must be met for waiver to be granted.

Prong 1: Without Fault

Under 20 CFR 404.507, "without fault" means you didn't cause the overpayment through any of the following:

• An incorrect statement which you knew or should have known was incorrect.
• Failure to furnish information which you knew or should have known to be material.
• Acceptance of a payment which you knew or could have been expected to know was incorrect.

The key phrase is "which you knew or should have known." This is judged based on your age, mental capacity, education, language, and access to information. A claimant with a 6th grade education whose only English experience is reading SSA notices is held to a different standard than a former CPA on disability. SSA must consider your individual circumstances.

Examples where SSA typically finds "without fault":

• You reported your earnings on time but SSA didn't process the report.
• You relied on SSA telephone agent advice that turned out to be wrong.
• You had a mental impairment (often the impairment for which you're on disability) that affected your understanding of reporting obligations.
• The overpayment was caused entirely by SSA processing error or system glitch.
• An auxiliary beneficiary aged out or married, you reported it, and SSA didn't update the record.

Examples where SSA typically finds "with fault" (waiver denied):

• You knowingly worked above SGA and did not report.
• You received a notice saying your benefits should stop and you cashed checks anyway.
• You misrepresented your medical condition during a CDR.
• You failed to report changes in living arrangements that affected SSI (note: this is more of an SSI issue under 42 USC 1383, but the without-fault standard parallels).

Prong 2: Defeats the Purpose OR Against Equity and Good Conscience

If you're without fault, you still have to show one of these two things.

Defeats the purpose of Title II under 20 CFR 404.508 means recovery would deprive you of income required for ordinary and necessary living expenses. SSA uses a financial worksheet that compares your monthly income against your monthly expenses (food, shelter, utilities, transportation, medical, support obligations, taxes). If recovery would push you below the threshold required for ordinary and necessary needs, recovery defeats the purpose.

The standard for what counts as "ordinary and necessary" comes from POMS GN 02250.115 and tracks roughly the federal poverty guidelines plus reasonable housing and medical costs. SSA is more generous than the basic FPL because the test asks about your actual current expenses, not a benchmark amount.

Against equity and good conscience under 20 CFR 404.509 means recovery is unfair given the circumstances. SSA recognizes three classic situations:

1. Reliance. You changed your financial position in reliance on the benefits being yours. For example, you bought a car, moved to a more expensive apartment, paid off other debts, gave money to a relative, or otherwise spent the funds in a way you wouldn't have if you had known they weren't yours.
2. Relinquishment of a valuable right. You gave up something of value because you thought the benefits were correct. For example, you accepted SSDI thinking it was higher than your private long-term disability and waived the LTD, only to learn later that SSDI was overpaid.
3. Detrimental change of position. You took an action that put you in a worse position than you would have been if you hadn't received the overpayment.

The equity-and-good-conscience test does not require financial hardship. You can be financially comfortable and still get a waiver if recovery would be inequitable. This is a less-used but powerful tool for people who don't meet the strict defeats-the-purpose test.

The 2024 Policy Changes That Are Still in Effect

In March 2024, then-Commissioner Martin O'Malley announced four major changes to SSA's overpayment handling. These changes remain in effect in 2026 and they significantly improve beneficiary protection. Knowing them is the difference between accepting a 100 percent benefit cutoff and getting a manageable 10 percent rate.

Change 1: 10 Percent Default Withholding Cap (SSDI)

Before March 2024, SSA's default was to withhold 100 percent of your monthly benefit to recover overpayments. This caused massive hardship. The 2024 change reduced the default withholding rate to 10 percent of your monthly benefit (or $10, whichever is greater). You no longer have to ask for this rate. It is the starting point. SSA can still withhold up to 100 percent if you agree to it or if SSA finds willful misrepresentation, but the default is now 10 percent.

Important: this 10 percent rule applies to SSDI overpayments under Title II. SSI overpayments under Title XVI have a separate default of the lesser of 10 percent of your monthly benefit or your total countable monthly income, under POMS SI 02220.016 as updated in 2024. Both Title II and Title XVI now have the 10 percent presumption.

Change 2: Burden Shift to SSA on Fault

The 2024 policy guidance shifted the burden of proof. SSA now has to demonstrate "with fault" by substantial evidence rather than requiring the beneficiary to prove "without fault." This is a meaningful change because in practice it means SSA has to show you knew or should have known the payment was incorrect. Without that showing, the without-fault finding stands.

Change 3: Easier Waiver Approval for Older Overpayments

Overpayments that occurred more than 36 months before the notice are given enhanced equity-and-good-conscience consideration. The reasoning is that the longer an overpayment goes undetected, the more reasonable it is for the beneficiary to have relied on the funds. This isn't an automatic waiver, but it raises the probability that the equity test is met.

Change 4: Streamlined Waiver Under $1,000

Overpayments under $1,000 in total are eligible for streamlined waiver under POMS GN 02250.350 as added in April 2024. SSA can grant waiver without the full SSA-632 financial review, based on a simpler attestation that the beneficiary is without fault. The threshold is $1,000 per the policy guidance. This handles the high-volume tail of small overpayments without bogging down the system.

Form SSA-632-BK Walkthrough

Form SSA-632-BK, titled "Request for Waiver of Overpayment Recovery or Change in Repayment Rate," is the workhorse. It's about 14 pages and asks for detailed information across these sections:

1. Section I: Personal Information. Name, address, SSN, claim number, the overpayment amount and date of notice.
2. Section II: Why You Believe the Overpayment Was Not Your Fault. The without-fault narrative. This is the most important section. Write your reasoning in plain language. Reference any SSA actions or non-actions that contributed.
3. Section III: Why Recovery Would Defeat the Purpose. The financial hardship case. Include monthly income, monthly expenses, household size, and dependents.
4. Section IV: Why Recovery Would Be Against Equity and Good Conscience. The reliance or detriment case. Describe how you used the funds in a way you wouldn't have if you'd known they weren't yours.
5. Section V: Income and Resources. Detailed monthly income breakdown (SSDI, other benefits, employment income, pension, etc.) and detailed resources (bank balances, retirement accounts, property other than home).
6. Section VI: Living Expenses. Monthly expenses including rent or mortgage, utilities, food, transportation, medical, insurance, court-ordered payments, and other necessary costs.
7. Section VII: Repayment Rate Request. If you want a different rate (lower than the 10 percent default), state it here with the financial justification.
8. Section VIII: Signature and Penalty Statement. Sign under penalty of perjury.

The form is available at SSA.gov as a fillable PDF or by request from any field office. You can submit it by mail, in person, or through SSA's secure online upload system if you have a my Social Security account.

What Happens After You File the Waiver

Once you submit Form SSA-632:

1. Collection should stop. Under POMS GN 02250.005, SSA suspends collection action while a waiver request is pending. If you're already having benefits withheld, request immediate refund of any amounts collected after the waiver was filed.
2. Personal conference offered. For waivers over $1,000, SSA will typically offer an in-person, video, or telephone conference where you can present your case. POMS GN 02270.005 covers conference procedures.
3. Decision in writing. SSA must issue a written decision granting or denying waiver. The decision must explain the basis for the without-fault finding and either the defeats-the-purpose or equity-and-good-conscience finding.
4. Appeal rights. If denied, you can appeal to the ALJ level within 60 days. The appeal sequence is the same as for medical disability appeals (reconsideration, ALJ hearing, Appeals Council, federal court).

The Appeal Path for Denied Waivers

If your waiver is denied, you have full appeal rights:

1. Reconsideration within 60 days. File SSA-561 referencing the waiver denial. A different SSA representative reviews the case.
2. ALJ hearing within 60 days of the reconsideration denial. File Form HA-501. You can present testimony, witness statements, and documentary evidence. Most ALJ-level waiver hearings are completed in 2 to 4 months.
3. Appeals Council within 60 days of the ALJ denial. File Form HA-520. The AC reviews on the written record.
4. Federal court within 60 days of the AC denial. File a civil action under 42 USC 405(g) in the federal district court for your district.

For more on the federal court appeal sequence, see our piece on 42 USC 405(g) civil actions. For the appeals council standard, see HALLEX I-3-3 appeals council remand standards.

Compromise: When Waiver Isn't Granted

If you can't get the full waiver, you can still ask SSA to compromise the debt under 31 USC 3711 and 20 CFR 404.515. The compromise is essentially a settlement at less than the full amount. SSA will accept a compromise when:

• The full amount cannot be collected within a reasonable time given the beneficiary's financial situation.
• The cost of collection would be disproportionate to the amount.
• There is significant doubt about SSA's ability to prove the overpayment in court.
• The compromise is in the best interest of the government.

Compromise offers are usually made on Form SSA-635 with supporting financial documentation. SSA will counter-offer or accept. Some compromises pay 25 to 50 percent of the original amount. This is a tool of last resort but it's available.

Special Rule: Cross-Program Recovery

Under 42 USC 1320b-17, SSA can recover Title II (SSDI) overpayments from Title XVI (SSI) benefits and vice versa. This is called cross-program recovery and it's governed by POMS GN 02210.008. The same 10 percent default cap applies. If you're a concurrent beneficiary (receiving both SSDI and SSI) and you have an SSDI overpayment, SSA can collect from your SSI check as well. The same waiver standards apply across programs.

What About Treasury Offset?

If you owe an SSDI overpayment and your benefits stop (you no longer receive SSDI), SSA can refer the debt to the Treasury Offset Program (TOP) under 31 USC 3716. TOP can then offset:

• Federal tax refunds
• Federal salary or wages (if you work for the federal government)
• Other federal payments such as some federal retirement

Important caveats: TOP cannot offset SSI benefits. TOP can offset SSDI benefits but only up to 15 percent per month with a $750 floor (the $750 must be left to you each month). And TOP can be challenged if the underlying debt is in waiver review or under appeal. For the full garnishment protection structure, see our piece on Section 207 anti-attachment.

Common Mistakes That Hurt Waiver Cases

1. Doing nothing. The 30-day window starts on the notice date. Filing anything (even just a brief letter requesting reconsideration) stops collection. Silence triggers automatic withholding.
2. Filling out the SSA-632 incompletely. The financial section is the meat of the form. Missing data triggers denial. Bank statements, expense receipts, and pay stubs should be attached.
3. Conceding fault in the narrative. Many beneficiaries write "I know I should have reported sooner" in Section II. Don't. Stick to what you did report and what SSA told you. The without-fault standard is judged against your individual circumstances.
4. Not requesting a personal conference. The conference is your chance to explain in plain language and answer questions. Skipping it usually weakens the case.
5. Missing the appeal deadline. 60 days from any denial. Mark the deadline the day the notice arrives.

What to Do This Week If You Got a Notice

1. Read the notice carefully. Note the overpayment amount, date, and recovery start date.
2. Pull every piece of documentation you have about the time period in question (pay stubs, bank statements, communications with SSA, copies of work reports you submitted).
3. Decide which of the three paths you want to pursue. You can pursue more than one.
4. Download Form SSA-561 (reconsideration) and Form SSA-632 (waiver) from SSA.gov.
5. If the overpayment is under $1,000, ask in writing for streamlined waiver under POMS GN 02250.350.
6. If the overpayment is over $1,000, file the SSA-632 completely with attached financial documentation.
7. If you can't pay even the 10 percent default rate, file SSA-635 simultaneously requesting a lower recovery rate.
8. If you want representation, contact a disability advocate or attorney. Some take overpayment cases on contingency for waiver of recovery (the fee comes out of the avoided overpayment under SSA-1696 fee agreement rules). See our SSA-1696 fee agreement guide.

Frequently Asked Questions