DOE announces changes to disability, student loan discharge program

student debtThe U.S. Department of Education announced new steps April 12 for proactively identifying student loan borrowers who may be eligible for loan forgiveness due to their disabilities.

“In 2012, the Administration took steps to streamline the process to allow for Americans who are totally and permanently disabled to use their Social Security designation to apply to have their loans discharged. But too many eligible borrowers were falling through the cracks, unaware they were eligible for relief…,”U.S. Education Undersecretary Ted Mitchell said in a news release. “Under the new process, we will notify potentially eligible borrowers about the benefit and guide them through steps needed to discharge their loans, helping thousands of borrowers.

“Americans with disabilities have a right to student loan relief. And we need to make it easier, not harder, for them to receive the benefits they are due.”

Under the Higher Education Act, the DOE is authorized to discharge student loans for people classified as having a “total and permanent disability.” This standard is significantly stricter than that for qualifying for Social Security Disability Insurance, Supplemental Security Income or other disability related benefits programs.

The DOE released new regulations [PDF] four years ago streamlining the application process for Total and Permanent Disability Discharge requests, allowing borrowers, for the first time, to apply with a single application process.

President Obama unveiled his Student Aid Bill of Rights in 2015, an effort that, among other things, launched a joint data sharing effort with the DOE and the Social Security Administration. The DOE subsequently identified 387,000 student loan borrowers with Social Security disability benefits whom the SSA had previously designated as “Medical Improvement Not Expected.”

Roughly 179,000 of these individuals were in default, meaning they had not contributed any student loan payments in the past year.

Beginning April 18, the DOE will mail notices to identified individuals, followed by an additional letter 120 days later if no response is received.

Those receiving letters will not be required to submit additional documentation. Rather, they will just be asked to sign and return the form, and their student loan debt will be discharged.

Disability advocates praised the announcement.

“This matching program is critical to help student-loan borrowers get the relief they are entitled to,” Persis Yu, a project director at the National Consumer Law Center, told Business Insider. “Many Social Security Disability recipients qualify for loan cancellation, yet most do not know about the discharge program.”

3 responses to “DOE announces changes to disability, student loan discharge program

  1. This is great news, except that those unsuspecting recipients of this loan forgiveness will now how to pay income tax on the amount forgiven since it will be counted as income. The IRS icertainly isn’t as forgiving.

    1. Look for an upcoming post regarding a bill that is being introduced to address this problem: “Bill introduced to exempt taxes on discharged debt from disability, student loan forgiveness program”

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