New regulations proposed for student loan discharge program

The Department of Education proposed new regulations July 17 to streamline the student debt forgiveness process for students who develop severe disabilities.

Photograph shows pen in hand signing a loan document
Student loan forgiveness

Under the new regulations, borrowers only have to submit one application to the DOE. Previously, they had to contact each of the different lenders and guarantee agencies, according to a ProPublica article.

Federal law allows people who develop certain disabilities to have their student debt eliminated.   A February 2011 investigation from ProPublica and the Center for Public Integrity, however, found that the programs is so heavily bureaucratized that it often takes people years to have their loans discharged.

Regardless of whether a person is classified as already having a disability by a different federal agency, the DOE conducts its own internal review into the nature of the person’s disability during each request for student loan forgiveness.

In February 2011, the DOE said it would consider allowing evaluations of a person’s disability from other agencies, such as the Social Security Administration, to speed up the evaluations. To the disappointment of many disability activists, the DOE backtracked from that position in September 2011.

The DOE argues that its standard for determining whether a person has a disability – that they have a “total and permanent disability” – is stricter than those used in other agencies. However, Congress passed a law in 2008 stating that the standard should be “unable to engage in any substantial gainful activity,” the standard used by the SSA.

“The most important reform is changing the definition [of disability], and without that it’s impossible to have full reform” Deanne Loonion, an attorney with the National Consumer Law Center, told ProPublica. “Given that they chose not to address that. I think they made some other substantial improvements.”

The ProPublica, Center for Public Integrity investigation also found that many people were denied their requests without any explanation from the DOE. In 2009, the U.S. District Court for the Western District of Missouri ruled that this process violated the borrower’s due process rights.

The proposed regulations require the rejection letter to provide a detailed explanation for the denial, as well as other steps to improvement communication between the borrowers and the DOE.

Last year, more than 78,000 student who borrowed federally supported and federally owned loans applied for discharge of their debts, according to an article in U.S. News.