Federal Government Finally Forgives Billions in Debt of Students Who’ve Become Disabled

The federal Department of Education said on Tuesday it would offer to write off $7.7 billion of student debt owed by disabled individuals, taking a big step to streamline a loan forgiveness program long plagued by bureaucratic delay and inefficiency.

Starting April 18, loan forgiveness letters will go out to approximately 387,000 borrowers who have been identified as totally and permanently disabled by the Social Security Administration, allowing them to sign and file a simplified application form to have their debt forgiven.

The move was enabled by changes in the department’s regulations governing the loan forgiveness program, which resulted from a 2011 ProPublica investigation published in partnership with Columbia’s Stabile Center for Investigative Journalism and the Center for Public Integrity.

Under federal law, borrowers who develop severe and lasting disabilities after taking out federal student loans are entitled to have their debts forgiven. As we noted in our investigation, the purpose of the rule was to spare former students who become disabled from a lifetime of ruined credit, garnished Social Security benefits, and spiraling debt.

But the investigation found that borrowers who become disabled faced such a high hurdle for proving their disability to the department — and obstacles such as unclear rejection letters and lack of medical standards for proving disability — that many simply gave up.

In one case, a borrower in a vegetative state was placed into default for failing to provide the department with income verification, according to an internal Department of Education Ombudsman Report that outlined problems with the program.

In another case documented in our February 2011 story, Tina Brooks, a former policewoman who had been severely injured during a training accident, could not get her $43,000 of student debt forgiven despite the fact that a Social Security judge had ruled she was fully disabled.

Internal reports showed the ombudsman had twice warned that the loan forgiveness program was flawed and needed to be reformed. But the Department of Education had ignored calls for reform from within and outside the agency.

That began to change after the story ran. Within a few weeks, the department forgave Brooks’ student debt. The following year it proposed reforms which took effect in 2013 and allowed the Department to use the Social Security Administration’s disability designation to qualify applicants for loan discharge.

That key reform is now enabling what the department hopes will be a “streamlined and more accurate process” for proactively identifying applicants who are eligible for student loan discharge, according to a statement.   (Continue Reading)

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Federal Government Finally Forgives Billions in Debt of Students Who’ve Become Disabled