Department of Education Identifies Borrowers Eligible for Total and Permanent Disability Loan Discharge

Posted By Eliana Osborn on April 14, 2016 at 11:44 am
Department of Education Identifies Borrowers Eligible for Total and Permanent Disability Loan Discharge

Getting your student loans discharged may be a dream for millennials, but the circumstances where that happens are few and far between. For individuals who are permanently or totally disabled though, federal protections do exist for getting student loans discharged. And, the Obama administration is publicizing this little-known benefit for those collecting Social Security benefits for disability.

The Department of Education recently announced that it is actively working to identify these eligible borrowers. In December 2015 and March 2016, the Department identified approximately eligible 387,000 borrowers, with more than half currently in default and a combined loan balance of over $7.7 billion. “[T]oo many eligible borrowers were falling through the cracks, unaware they were eligible for relief. Borrowers like one such woman whose side effects from her breast cancer treatment left her totally and permanently disabled. After repeated attempts, she finally received a disability discharge—seven years after her first application,” said U.S. Education Under Secretary Ted Mitchell in a statement this week.

Each year, between 500,000 and one million new disability claims are approved by the Social Security Administration. The vast majority are short-term situations where workers transition back out as they can return to work. A small number of cases involve those who are permanently and totally disabled; only this group is eligible for loan discharge.

The Department of Education refers to this as a Total and Permanent Disability (TPD) loan discharge, which is available for direct loans, FFEL loans, Perkins loans, and TEACH grants. Once a person begins the application for TPD loan discharge, any collections activity is frozen while the case is being investigated. If a claim is denied, only then are lenders able to resume collections.

As part of a package of student loan initiatives announced in July of 2015, the administration noted a change to how TPD loan discharge would work. According to a press release, “Beginning in 2016, the Department and the Social Security Administration (SSA) will conduct regular data matches to identify federal student loan borrowers who may be eligible for a Total and Permanent Disability (TPD) loan discharge.” SSA and the Department of Education will also look at those receiving partial payments to initiate conversations with borrowers who might benefit from income-driven repayment plans.

A third of the way into 2016, a method for easier discharge is finally coming into place. DOE is working with SSA to pull out applications marked as “medical improvement not expected.” An estimated 400,000 borrowers will be affected, with $7.7 billion in loan forgiveness.

There’s a concern that Social Security checks may be impacted by loan forgiveness; in the past, some Social Security was garnished to repay federal loans in default. Education officials say they are working to make sure no such problems arise. Still, forgiven loan amounts are taxable funds that recipients have to include when they file with the IRS.

Starting in the second half of April, letters will go out to potential candidates for TPD loan discharge. The president’s Student Aid Bill of Rights, released in March 2015 by then Secretary of Education Arne Duncan, included a commitment to better information about student loan programs. Bringing this specific form of loan discharge out of the shadows and into public consciousness should make it more available to those who need it most.

“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,” said U.S. Education Under Secretary Ted Mitchell in the recent statement.

Eliana Osborn
Eliana Osborn is an associate English professor at Arizona Western College, with degrees from Brigham Young University and Northern Arizona University. She’s published widely in forums such as The New York Times, the Washington Post, the Christian Science Monitor, and the Chronicle of Higher Education.

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