The U.S. Department of Education announced recently that they will cancel federal student loan debt for borrowers who are no longer able to work due to disabilities. This announcement affects tens of thousands of borrowers currently paying on outstanding federal student loan balances.
Student loan advocates say that this small step is the first of many to help reform the student lending system, including opening debt forgiveness to groups who are legally entitled to receive it but have not yet received debt forgiveness.
According to an investigation conducted by NPR, 28 percent of eligible student loan borrowers have either had their loans completely erased or are on track to be erased through the “Total and Permanent Disability Discharge” program. This number is alarmingly low. According to the Department of Education, more than 41,000 borrowers have permanent disabilities. These 41,000 borrowers owe a collective $1.3 billion in student loan debts that would otherwise be eligible for discharge.
Many of these disabled borrowers had previously had their loans erased. However, once the COVID-19 pandemic hit, they struggled to submit required income-monitoring documentation, resulting in these loans being restored. The Department of Education announced that borrowers who are currently required to submit income-monitoring information will not have to do this for the duration of the COVID-19 pandemic. Waiving this requirement will help ensure that borrowers who are totally and permanently disabled will not be hurt by their inability to submit required paperwork during this health crisis.
For several decades, federal law has made it possible for borrowers who are no longer able to work and earn an income to support themselves due to a severe and permanent disability to receive relief from their student loan debt. While the goals behind the law are admirable, the execution has left much to be desired. Between March 2016 and September 2019, NPR reported that only 28 percent of those eligible for debt forgiveness actually received it.
NPR also reported that of the 365,000 borrowers who are eligible for this relief, 225,000 had defaulted on their student loan obligations.
Many argue that the problem with the system has to do with the fact that disabled borrowers have the actively seek out the loan forgiveness. The requirements placed on these borrowers to respond to eligibility notices and report their income qualifications have left many of them to fall through the cracks. Requiring someone who is already struggling with a debilitating disability, such as chronic memory loss or other illness, to keep up with required paperwork places a substantial burden on these individuals.
NPR also reported that in 2019, tens of thousands of borrowers asked for assistance, had their student loans conditionally discharged, and then had them reinstated due to the failure to keep up with the annual paperwork. Critics argue that this paperwork requirement forces the borrowers to do too much just to prove that they are not able to work. In fact, income-monitoring has consistently been a problem for many disabled borrowers.
Representatives from the Department of Education say that they hope this change will alleviate some of that pressure, at least temporarily. Student loan reform advocates believe that this change needs to be a permanent one, at least when it comes to requiring permanently disabled borrowers to continually provide proof of their inability to work.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.
