Changes for Disability in Student Education Loan Discharge Process

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Education Department aims to fix broken disability loan forgiveness process as disabled individuals may or may not be granted student loan forgiveness under the Department of Education's disability determination rules.

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This summer, the U.S. Department of Education proposed several reforms to its dysfunctional student loan forgiveness process for individuals who are permanently disabled. The Department of Education drafted the reforms after a 2011 investigation by the website ProPublica found gross inadequacies in the Department's process for discharging loans for the disabled.

Current Rules for Discharging Loans of the Disabled

Currently, the Department of Education allows those who are permanently disabled to apply to have their student loans discharged. Only individuals whose total, permanent disability prevents them from working are eligible for loan forgiveness.

Specifically, loans can be discharged for individuals who cannot perform any "substantial gainful activity" due to a physical or mental impairment that has lasted continuously for 60 months or more, is expected to last more than 60 consecutive months, or is expected to end in death. Individuals who have been found unemployable by the Department of Veterans Affairs due to a disability acquired in the line of duty automatically qualify for student loan forgiveness.

Once the Department of Education reviews an individual's application, it makes its disability determination. If approved, applicants will have all of their student loan debt discharged.

Problems with the Current Rules

Unfortunately, the Department of Education's process for determining an applicant's eligibility is inconsistent and inadequate.

One glaring issue is that individuals whom the Social Security Administration finds permanently disabled and unable to work are not necessarily eligible to have their loans discharged under the Department of Education's rules. This difference leaves many who receive Social Security Disability payments on the hook for their student loan payments, even though they have no work income. In some cases, their disability payments are garnished to pay their student loan bills.

Another major problem with the current system is the confusing application process. Instead of one application for all types of student loans, individuals seeking loan forgiveness for a disability must apply to each individual lender, including the Department of Education, loan holders and guarantors.

The Department's Proposed Rule Changes

Fortunately, the Department of Education has now taken a step in the right direction. It published a list of proposed changes to its disability determination process intended to improve communication and streamline the application process.

In 2009, a federal court in Missouri found the Department of Education's loan forgiveness practices for disabled individuals violated an individual's right to due process. Now, the Department would like to improve communication with applicants for loan forgiveness. It would like to require all applicants to appoint a "borrower's representative" who will also receive all communications from the Department of Education. The representative could be a caregiver or a lawyer.

The Department has also proposed changes to its rejection letters. Currently, when an applicant is denied a discharge by the Department, the letter does not give clear, specific reasons why the applicant was not found to be totally, permanently disabled. The Department would like to revise its letters to include specific details and evidence about why an applicant was denied a student loan discharge.

Lastly, the Department seeks to streamline its application process by consolidating all applications so an individual only has to apply once.

While these changes are significant, the Department of Education has not proposed the change that would make the biggest difference for disabled individuals: Aligning its disability determinations with those of the Social Security Administration. The Department claims that its disability standard is different than the Social Security Administration's standard since the Social Security Administration can reduce or terminate benefits if an individual's health improves.

However, failing to align its determinations with that of the Social Security Administration will continue to leave many individuals who are deemed disabled and unable to work by one federal agency on the hook for payments to another federal agency.

If you have been denied loan forgiveness by the Department of Education despite your disability status with the Social Security Administration, please contact an experienced attorney who can help you challenge the Department of Education's determination and obtain the financial assistance to which you are entitled.

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