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Loan Discharge Program

by Gabe Cazares

From the Editor: Gabe is a governmental affairs specialist for the National Federation of the Blind and brings to his job the ability to write and speak passionately about issues confronting the blind and the legislative proposals to address them. This article will be of particular interest to you if you or your parent received a government loan for your college education which you or your parent now cannot repay due to your disability. Here’s what he has to say:

Recently the Obama Administration announced changes to its Total and Permanent Disability Discharge (TPD) Program. The TPD Program relieves individuals from their responsibility of repaying, on the basis of a total and permanent disability, the following types of loans: William D. Ford Federal Direct Loan, Federal Family Education Loan, and/or Federal Perkins Loan, or completing a TEACH Grant service obligation.

In 2012 the Obama administration took steps to make it easier for qualifying individuals with disabilities to use their Social Security designation to apply for the program. Despite this effort, the administration saw a very small increase in the number of applicants. On April 12, 2016, the Obama Administration announced that the United States Department of Education, in conjunction with the Social Security Administration (SSA), began a match program in which those recipients of Social Security benefits with the specific designation of medical improvement not expected, who also qualify for the loan discharge program, are being identified between the two agencies. Upon its first review, the Departments of Education and Social Security identified 387,000 individuals. Of those identified 179,000 are currently in default of their loans.

How does the TDP program work?

In order to qualify, an individual must have a total and permanent disability as defined by the Veterans Administration determination of employability due to a service-connected disability, or the Social Security Administration’s designation of medical improvement not expected, or by certification by a qualified medical professional. Starting April 18, 2016, qualifying individuals began to receive letters from the Department of Education explaining step-by-step how they can have their loans discharged. These explanations also include the tax implications of a discharge; the government can—in most cases—tax the loan amount forgiven.

Individuals with disabilities will no longer have to submit proof of disability and can simply fill out and sign a customized application. Letters will be going out over a sixteen-week period, with a second letter following up in 120 days. If a qualified individual does not receive notification, he or she can follow the necessary steps found on the Department of Education’s website <https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/disability-discharge>.

Once approved

Once approved, your loan or TEACH Grant service obligation is discharged on the basis of a total and permanent disability. However, those who discharge their loans under a Social Security designation or a physician’s authorization will be subject to a three-year monitoring period that begins on the day the discharge is approved. During this three-year monitoring period, “loans can be reinstated for repayment if:

1. You have annual employment earnings that exceed the poverty guideline amount for a family of two in your state, regardless of your actual family size;
2. You receive a new William D. Ford Federal Direct Loan Program loan (Direct Loan), Federal Perkins Loan Program loan (Perkins Loan), or TEACH Grant;
3. A disbursement of a Direct Loan, Perkins Loan, or TEACH Grant that you received before the discharge date is made, and you do not ensure the return of the full amount of the disbursement within 120 days of the disbursement date; or
4. You receive a notice from the SSA stating that you are no longer totally and permanently disabled, or that your disability review will no longer be the five-year or seven-year review period indicated in your most recent SSA notice of award for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits.”

A word of caution to readers considering this program: in 2016, 100 percent of the federal poverty level for a family of two is $16,020. If your annual compensation exceeds this amount, or if you expect to soon be making more than this allotted amount annually, you do not qualify for a TDP discharge. The federal poverty level is adjusted from year to year. It is also important to note that these monitoring requirements do not apply to individuals qualifying under the Veterans Administration determination of employability due to a service-connected disability. When determining if this program is best for you, it is important to consider all current and future plans for employment.

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