Even after Social Security has found that you are disabled, there are still things to do. One of these is to seek forgiveness of any outstanding student loans. If you have student loans, you probably know that they are next to impossible to get rid of. You cannot escape these debts even in bankruptcy, save for very specific circumstances. But, for the disabled, relief is possible.
Under current Federal law, a person adjudged disabled by Social Security can apply to have his or her student loan debt forgiven. This appears to be filed under the category of "easier said than done." As with so much student debt, what options a disabled person has depends on the nature of the loans. Some student debt is private, some is from the government directly, and some is guaranteed by the government. To figure out what sort of debt a person is dealing with, he or she can log into the National Student Loan Data System (NSLDS)
A New Plan For Debt Forgiveness
Perhaps because this process is so bureaucratic and complicated, many disabled student loan debtors do not know what rights they have. The U.S. Department of Education (DOE) is currently making an effort to reach those disabled persons with student loans to advise them to seek debt relief. Starting this month, DOE is going to send letters to those debtors they know to be disabled. These letters will explain in detail what steps such debtors need to take to seek forgiveness of their student debt. One way the DOE will find disabled debtors will be via the cooperation of Social Security. If Social Security has found you permanently disabled, and you have student loan debt, watch for a letter from DOE. The new process of applying for debt forgiveness is supposed to be quite simple, as easy as signing and returning a form. From what I have read, DOE will not require further documentation of a person's disability. If you think Social Security does not have your current address, give it to them now. You do not want to miss out on a letter this important.
Two Complications To Keep In Mind
Keep in mind that DOE will monitor the earnings of those persons to whom they grant debt relief. If a person goes back to work, he or she might have to resume
paying his or her student loans. This seems like a perverse incentive that keeps people from trying to go back to work. A disabled person inclined to rejoin the work force might stay on the sidelines if getting a minimum wage job means resuming responsibility for tens of thousands of dollars in debt. Perhaps the DOE will adjust this part of the program in future years.
One more wrinkle to be aware of: the IRS can consider the relief from debt income. President Obama has asked Congress to exclude this debt relief from income as part of his 2017 budget. At present, however, that is not law. It would be a shame for a disabled person to get out from under student loan debt only to get a huge tax bill the following April 15th. If you get your student loans forgiven, it would be an excellent time to consult with an accountant.
Good Work By The Government To Help The Disabled.
Being disabled is bad enough. Piling student loan debt on can make a disabled person's situation unworkable. This effort by DOE and SSA is an example of good work by the government, the sort of thing that actually helps the people who most need help.