The Department of Education Just Did Something Major for Americans with Disabilities
“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.” ~ U.S. Education Under Secretary Ted Mitchell
Since 2012, people certified by the Social Security Administration as “Totally and Permanently Disabled” can use that finding to qualify for discharge of their federal student loans. Even though these 387,000 people qualified for discharge of their student loans, they continue to struggle with their federal student loans—often because they just don’t know they are could have their debt discharged.
“We are encouraged to see the Department of Education take action to notify student loan borrowers who qualify for Total and Permanent Disability. Today’s actions have the ability to discharge over 7 billion dollars of student loan debt and improve the lives of more than 387,000 people. Student Debt Crisis is both encouraged by these steps and empowered to demand more comprehensive reform. It is our hope that the education department will continue to work with agencies such as the Social Security Administration and the Internal Revenue Service to notify student loan borrowers about all available government loan programs which will prevent further defaults.” ~ Natalia Abrams, Executive Director, Student Debt Crisis
As part of the implementation of President Obama’s Student Aid Bill of Rights, the Department compared Social Security Administration data to student loan records to proactively identify qualifying borrowers.
The Department of Education will be reaching out to each individual borrower who qualifies, letting them know that their federal student loans may be forgiven, and including an application for the discharge. Letters will begin going out next week and will continue to be sent over the next 16 weeks.
Letters will include the U.S. Department of Education seal in the top right corner and include the recipient’s name and Federal Student Aid account number. The letters will look like this:
Around 179,000 of these people are currently in default, with over 100,000 already in the Treasury Offset Program—meaning some of their Disability benefits, tax refunds, and other federal benefits may be seized every month for payment on their defaulted student loans.
“The Department of Education’s action marks an important first step in restoring a crucial Social Security protection. Social Security benefits are appropriately shielded from creditors except in one situation – when the creditor is the federal government. The Department of Education’s action will, among other things, end the garnishment of the Social Security benefits of around 100,000 beneficiaries. This is important but more must be done. In 2013 alone, the federal government seized $150 million in Social Security benefits for outstanding student loans from retirees, widows, veterans, and many others on limited income. This cruel practice must stop. Perhaps, having taken this significant step, the federal government will protect all Social Security benefits from garnishment for student and other outstanding debt, as was always intended and as was the case up until 1996.” ~ Nancy Altman, Founding Co-director, Social Security Works
Unfortunately, student debt that is discharged or forgiven by the government can be included in an individual’s taxable income for federal tax filing purposes, so the administration can’t simply automatically discharge the debt. (This may not apply in certain circumstances, including insolvency. Individuals should consult a qualified tax accountant or lawyer for advice.)
The Obama administration has called for exclusion of forgiven student debt from taxable income, but Congress has yet to act.
“Today the Deparment of Education took a simple yet powerful action to educate people with disabilities receiving Social Security about their legal right to have their student loans discharged. This will come as a huge relief for people who are already struggling with the economic and financial challeneges of a severe disability or injury. The AFL-CIO applauds the administration’s efforts to simplify the discharge process for people who qualify for Social Security and ecnourages the Department to take additional steps to improve outreach and communication to student loan borrowers more generally. Now Congress mus act to ensure people who qualify for student loan forgiveness or discharge aren’t hit with an additional tax burden.” ~ Liz Shuler, Executive Secretary-Treasurer, AFL-CIO
You can learn more about Total and Permanent Disability discharge of federal student loans here: https://disabilitydischarge.com/faqs
If you think you or a loved one may have been contacted by a debt relief scam company trying to take advantage of this program, you can file a complaint with the CFPB here: http://www.consumerfinance.gov/complaint/