U.S. Department of Education Acts to Protect Social Security Benefits for Borrowers with Disabilities
July 11, 2016
Relief for Student Loan Borrowers who are collecting Social Security Disability Benefits
In April, the U.S. Department of Education announced a new process to proactively identify and assist federal student loan borrowers with disabilities who may be eligible for Total and Permanent Disability (TPD) loan discharge. This effort was called for by President Obama in his Student Aid Bill of Rights. The Higher Education Act allows for loan forgiveness for borrowers who are totally and permanently disabled. By proactively identifying and engaging borrowers who may be eligible for TPD loan discharge, the Department is fulfilling its commitment to ensure that borrowers who are totally and permanently disabled have the information needed to take full advantage of the debt relief to which they are entitled.
“In 2012, the Administration took steps to streamline the process to allow for Americans who are totally and permanently disabled to use their Social Security designation to apply to have their loans discharged. But too many eligible borrowers were falling through the cracks, unaware they were eligible for relief.” said U.S. Education Under Secretary Ted Mitchell. “Under the new process, we will notify potentially eligible borrowers about the benefit and guide them through steps needed to discharge their loans, helping thousands of borrowers. Americans with disabilities have a right to student loan relief. And we need to make it easier, not harder, for them to receive the benefits they are due.”
Starting April 18, 2016, borrowers who were positively identified in the match should have received a customized letter explaining that the borrower is eligible for loan forgiveness and the simple steps needed to receive a discharge. Unlike other borrowers, those identified through the data match will not be required to submit documentation of their eligibility. Instead, they are eligible for a streamlined process by which they simply sign and return the completed application. Initial notification letters will be sent over a sixteen-week period and will be followed up with a second letter that will be sent 120 days after the initial letter if a signed application is not received. Notification will also include information to ensure borrowers understand the potential tax implications for this benefit and can make an informed decision about electing a discharge.
While the President’s 2017 Budget proposal seeks to exclude TPD discharges and other Department of Education loan forgiveness programs from taxable income, unless Congress acts, loans discharged under the TPD program may be subject to taxation, depending on the specific circumstances of the borrower.
Going forward, this match will be conducted quarterly to ensure that newly eligible borrowers are aware of their options.
Borrowers are encouraged to visit https://disabilitydischarge.com for more information