Obama says the government will help 387,000 permanently disabled people get their student debt forgiven

The Obama administration plans to forgive $7.7 billion in federal student loans held by nearly 400,000 permanently disabled Americans.

By law, anyone with a severe disability is eligible to have the government discharge their federal student loans. The administration took steps four years ago to make the process easier by letting people who are totally and permanently disabled use their Social Security designation to apply for a discharge, but few took advantage. The Department of Education is now taking it upon itself to identify eligible borrowers and guide them through the steps to discharge their loans.

“Too many eligible borrowers were falling through the cracks, unaware they were eligible for relief,” said Education Under Secretary Ted Mitchell in a statement. “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.”

The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The borrowers identified by the Department won’t have to go through the typical application process for receiving a disability discharge, which requires sending in documented proof of their disability. Instead, the borrower will simply have to sign and return the completed application enclosed in the letter.

If every borrower identified by the Department decides to have his or her debt forgiven, the government will end up discharging more than $7.7 billion in debt, according to the Department.

“Americans with disabilities have a right to student loan relief,” Ted Mitchell, the undersecretary of education, said in a statement. “And we need to make it easier, not harder, for them to receive the benefits they are due.”

Letters will be sent out to 387,000 eligible people starting next week, with simple forms requiring just a signature to apply for the program instead of the complicated process that’s in place currently, the Washington Post reports. If applicants are accepted, they’ll be monitored for three years to check that their status is legitimate.

President Barack Obama called for a more streamlined process as part of his Student Aid Bill of Rights last year. Mitchell said the department worked with the Social Security Administration to identify people with federal student loans who were also receiving disability payments and deemed permanently disabled.

Beginning Monday, the department will start sending letters to that group of about 387,000, explaining they are eligible for loan forgiveness. The letter will include an application that they will simply sign and return. Unlike other borrowers, they will not be required to submit documentation of their eligibility.

Once the loan is erased, a three-year monitoring period will begin. If the borrower’s earning status changes and increases above a certain threshold, he or she may have to start making payments again.

Disability-rights advocates praised the new steps.

“This matching program is critical to help student-loan borrowers get the relief they are entitled to,” said Persis Yu, a project director at the National Consumer Law Center. “Many Social Security Disability recipients qualify for loan cancellation, yet most do not know about the discharge program.”

The AFL-CIO said the department took a “simple yet powerful” step to educate people about their rights.

“This will come as a huge relief for people who are already struggling with the economic and financial challenges of a severe disability or injury,” said Liz Shuler, secretary-treasurer of the AFL-CIO.

The move could prevent hundreds of thousands from having their social security benefits and tax returns withheld because of student loan defaults.