Hundreds of thousands of
student loan borrowers will now have an easier path to getting their loans
discharged, the Obama administration announced this month.
The Department of Education will send letters to 387,000 people they’ve identified
as being eligible for a total and permanent disability discharge, a description
that allow federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The
borrowers identified by the Department won’t have to go through the classic
application process for receiving a disability release, which requires sending
in known corroboration of their disability. Instead, the borrower will simply
have to indication and return the completed application enclosed in the letter.
If every borrower recognized
by the Department decides to have his or her arrears forgiven, the government
will end up discharging more than $7.7 billion in debt, according to the division.
“Americans with
disabilities have a right to student loan release,” Ted Mitchell, the
undersecretary of education, said in a statement. “And we need to make it
easier, not harder, for them to receive the benefits they are due.”
About 179,000 of the
borrowers identified by the Department are in default on their student loans,
and of that group more than 100,000 are at risk of having their toll refunds or
Social Security checks garnished to pay off the debt. frequently borrowers
losing out on these benefits aren’t even aware that they’re eligible for a
disability discharge, said Persist Yu, the director of the Student Loan
Borrower Assistance Project at the National Consumer Law Center.
“Borrowers just frankly
don’t know about this program,” she said. “In the past it’s been incredibly
complicated to apply and that process has been in receipt of better over time,
but some people just assume that it’s not going to work.” The letters will help
make more borrowers aware of their rights, Yu said.
The government
identified suitable borrowers by matching Department of Education data on
student loan borrowers with Social safety measures supervision data to
determine which federal student loan borrowers are receiving disability
benefits and whose conditions aren't expected to improve.
Yu highly praised the collaboration and applauded the notice,
but she said she wish it went one step added by automatically stopping
collections and garnishment on borrowers the government identified as eligible
for a disability liberation. The Department may move violently to reach some
borrowers because they don’t have their most updated information on file, she
noted. In addition, some borrowers who qualify for free because of a
psychological reason -- such as an Alzheimer’s -- may not be able of understanding
the materials they receive, she said.
“We identify you as
somebody who qualifies for this, so as long as we’ve known you can we at least
stop taking your money?” Yu said.
Eligible borrowers who do decide to take plus of the discharge
option should be aware that the forgiven debt may be considered taxable income.
The Osama administration asked Congress in its 2017 budget
proposal to get rid of
the tax penalty for disability discharges, but meanwhile borrowers may find
themselves paying taxes on the forgive loans.
Despite these drawback, Adam Minsk, a Boston-based lawyer
who specializes in student loan issues, said he’s “cautiously optimistic,”
about the proclamation and will be watching to see how it plays out. “When
you’re already totally and everlastingly disabled it can be exigent to go
through this process without some help,” he said. “If this helps people that
are clearly eligible for discharge get one with less red tape, less waiting and
less indecision, that’s great.
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