Obama administration to forgive student debt of nearly 400,000 permanently disabled Americans

Nearly 400,000 permanently disabled Americans will have their student loans totaling $7.7 billion forgiven by the Obama administration.

According to U.S. law, anyone with a severe disability is eligible to have the U.S. government discharge their federal student loans. Four years ago the government made it easier for the disabled to apply for the discharge by allowing anyone totally and permanently disabled to use their Social Security designation to apply. However, few took advantage of the regulation. The U.S. Department of Education is now trying to identify those who are elgibile for forgiveness and guide them through the application process. The new plan follows on Obama's announcement last year of a Student Aid Bill of Rights designed to reform the way in which student loans are repaid.

Ted Mitchell, Education Under Secretary said:“Too many eligible borrowers were falling through the cracks, unaware they were eligible for relief. 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.”Persi Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said many disabled students simply do not know they are eligible for debt relief:“Borrowers just frankly don’t know about this program. In the past it’s been incredibly complicated to apply and that process has been getting better over time, but some people just assume that it’s not going to work.”The Department of Education, working with the Social Security Administration has identified 387,000 who meet the criteria for discharge of their loans. Of those, about 179,000 are in default on their loans. This could put them at risk of losing any tax refunds and of having Social Security benefits garnished.

Borrowers who are identified as eligible for relief will receive a letter from the government explaining how to receive a discharge. They will not be required to submit any documentation as would be the case if they had applied on their own. The letter will note that the government still has the right to tax the loan amounts that were discharged.