Monthly Archives: March 2014

New Rules for Student Loan Debt Discharge for Workers with Disabilities

Sustaining a disability later in life can have widespread consequences that affect the individual not only physically, but also emotionally and financially. Many disability diagnoses are accompanied by exorbitant medical bills. In addition, some people newly diagnosed with disabilities may find themselves unable to perform their current job responsibilities. In such situations, options exist to assist the individual in adjusting to his or her new way of life.

Social Security disability benefits are one avenue of support for workers who are no longer able to perform their job duties. In addition to Social Security disability benefits, workers who have completed some type of higher education and have outstanding student loans may be able to have their debt forgiven.

Workers with unpaid federal student loans may be eligible for “Total and Permanent Disability (TPD) discharge” of their debt if they are “unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment.” The impairment must either “be expected to result in death,” or last for a “continuous period of not less than 60 months,” according to the U.S. Department of Education.

New rules, recently proposed by the Education Department, seek to improve the student loan forgiveness program, as many have complained it is inefficient and ineffective. In fact, a February 2011 investigation by ProPublica found that many individuals with disabilities continued to be held responsible for their student loan debts due to deficiencies in the system. Some even had their Social Security disability benefits garnished to pay off their student loan debt.

New Proposed Rules for Student Loan Forgiveness

The Education Department’s proposals are intended to eliminate redundant steps in the loan forgiveness process and to provide increased transparency when an application is rejected.

Most notably, those with student loan debt will now be required to submit just one application to the Education Department to discharge their debt. In the past, applicants were obligated to submit to an initial review by the loan holders. Not only did that requirement complicate the process, but it also prevented many otherwise eligible borrowers from presenting their applications to the Education Department, as the loan holders had the ability to reject applications without government review.

In addition, the Education Department will take steps to increase its communication with applicants. The Department will now have to provide a “detailed explanation” when an applicant is denied, and must communicate with a representative retained by the applicant, such as an attorney. According to the ProPublica report, in the past, the Education Department often failed to identify a reason for rejecting a discharge application.

The investigation found that of 106 complaints, 36 percent of the applications had been rejected because the applicant’s doctor had not sufficiently answered requests from the department for more information. Rather than informing applicants of the deficiency, though, the Education Department sent letters merely stating the application was denied due to a “medical review failure.” Despite the issues perceived by the Education Department, 23 percent of those applicants had already been determined to be disabled by the Social Security Administration.

Should the Education Department Rely More Heavily on SSD Decisions?

While past critics of the loan forgiveness process for borrowers with disabilities applaud these reforms, many argue that the most obvious change, with the greatest potential to streamline the process, has been ignored. They contend that the most efficient method would have been to eliminate the Education Department’s disability review altogether, and rely on the findings of the Social Security Administration.

Since 2008, the definition of disability used by these two departments has been similar, both requiring that the individual be unable to “engage in substantial gainful activity.” The Education Department has argued, though, that the legal standard is different, since Social Security disability benefits can be stopped if a recipient is able to return to work. By contrast, once a student loan is discharged, the obligation to pay back the debt is gone forever.

The process for applying for Social Security disability benefits can be complex. An experienced California Social Security disability attorney can ensure the rights of individuals with disabilities are protected.