Dept. of Education to Forgive $7.8B in Student Loans for Permanently Disabled Borrowers

About 387,000 people are eligible for "Total and Permanent Disability" loan discharge

The Obama administration is taking steps to help people with disabilities get their student loan debt forgiven, safeguarding their Social Security payments.

The Education Department on Tuesday announced a new process to better identify hundreds of thousands of borrowers who are eligible to apply for an existing federal loan forgiveness program. The program is for people who are permanently disabled and cannot work.

Under Secretary of Education Ted Mitchell says too few borrowers have been taking advantage of the program because they may not know about it or the process of applying was too complicated. Mitchell said one woman who had been suffering with side effects from breast cancer treatment that left her permanently disabled tried repeatedly to get her debt discharged — a process that took seven years.

"That's not how government should work," Mitchell said in an interview. "These are people who are struggling with health issues. We want to take one worry off their plate."

Letters from the department will be sent to about 387,000 people who the agency has identified as eligible — loans worth about $7.8 billion. Of those, about 179,000 people have student loans that are currently in default.

Borrowers whose loans are forgiven then would not be at risk of having their Social Security or disability payments seized.

President Barack Obama called for a more streamlined process as part of his Student Aid Bill of Rights last year. Mitchell said the department worked with the Social Security Administration to identify people with federal student loans who were also receiving disability payments, and deemed permanently disabled.

Beginning April 18, the department will start sending letters to that group of about 387,000, explaining they are eligible for loan forgiveness. The letter will include an application that they will simply sign and return. Unlike other borrowers, they will not be required to submit documentation of their eligibility.

Once the loan is erased, a three-year monitoring period will begin. If the borrower's earning status changes and increases above a certain threshold, he or she may have to start making payments again.

Disability-rights advocates praised the new steps.

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

The AFL-CIO said the department took a "simple yet powerful" step to educate people about their rights. "This will come as a huge relief for people who are already struggling with the economic and financial challenges of a severe disability or injury," said Liz Shuler, Secretary-Treasurer of the AFL-CIO.

Copyright AP - Associated Press
Contact Us