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Student loan discharge for the disabled, part one

When someone becomes disabled, their entire life changes. They are often unable to work, which in turn can lead to severe financial shortfalls. Programs like Social Security Disability help to bridge the financial gap, but the monthly stipends paid through SSD are usually a fraction of a recipient's former income. Any additional financial obligations such as student loan payments can be difficult, if not impossible, to pay, and may push the recipient into deep debt or bankruptcy.

Even in bankruptcy, student loans are almost impossible to discharge. However, there is a federal program that forgives student debt if the borrower has become disabled and unable to work. The program was created in recognition of the often decreased income of someone with a disability, with the goal of protecting those borrowers from debt, bankruptcy, a ruined credit rating, and the garnishment of precious SSD benefits in order to pay student loans.

While student loan forgiveness is certainly a good idea in theory, many claim that the program is exceedingly bad in execution. The application system is long and tedious, and mirrors many of the processes used for the determination of SSD eligibility, leading to frustration on the part of applicants who find themselves repeating complicated steps they have already taken.

In addition, applicants are often not told when and why their applications were denied. In an unpublished report by the federal student aid ombudsman, 36 percent of applications analyzed were denied because the applicant's doctor had not adequately responded to federal requests for additional documentation. However, applicants were only told that their application was denied because of "medical review failure", leaving them uninformed and unable to remedy the problem.

We will continue our examination of this topic next week.

Source: ProPublica, "Education Department Bureaucracy Keeps Disabled Borrowers in Debt", Sasha Chavkin, Cezary Podkul, Jeannette Neumann and Ben Protess, 13 February 2011

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