Journalism in the Public Interest

Education Department Revamps Broken Disability Review Program

Despite the changes to its student loan program to help borrowers who’ve become disabled, the government declined to include a key reform.


Students walk near Royce Hall on the campus of UCLA on April 23, 2012 in Los Angeles, Calif. (Kevork Djansezian/Getty Images)

The Education Department proposed new rules on Tuesday to revamp its troubled program for forgiving the federal student loans of borrowers who become disabled.

The new regulations came after an investigation last year by ProPublica found that the department's dysfunctional system for evaluating disability was keeping many genuinely disabled borrowers buried in student debt. Under federal law, borrowers who develop severe and lasting disabilities are entitled to get their loans forgiven.

The department's proposed reforms would streamline the application process and improve its communication with borrowers, eliminating many of the bureaucratic hurdles that frustrated applicants in the past.

But the department rejected a key reform that would have allowed many disabled borrowers to bypass its review altogether — tying the Education Department's standard for disability to that of the Social Security Administration, so that Social Security disability findings could be used to discharge loans.

"The most important reform is changing the definition [of disability], and without that it's impossible to have full reform," said Deanne Loonin, an attorney with the National Consumer Law Center and the director of its Student Loan Borrower Assistance program. "Given that they chose not to address that, I think they made some other substantial improvements."

Perhaps the most significant change is that all borrowers will now submit a single discharge application to the Education Department. Previously, many applicants had to undergo initial reviews by loan holders and guarantors, who could reject applications before they even reached the department.

The department also announced several reforms intended to improve communications with borrowers, which a federal court in Missouri found in 2009 to be so poor that they violated applicants' due process rights. Individuals seeking a discharge may now nominate a "borrowers representative," such as an attorney or caregiver, who must also receive all communications from the department. Letters that reject disability discharge applications must include detailed explanations for the denial.

Loonin, the student borrowers' advocate, said the changes will be significant — if the department makes sure they're actually implemented.

"We're still having problems with a lot of these things now," she said, noting that some of her clients continue to receive what she calls "rogue letters" that deny their applications without providing an explanation.

The department's refusal to accept disability findings from Social Security also means the department rejected what advocates describe as the single most important, and obvious, fix of the program: Doing so could have enabled a large proportion of applicants to avoid the cumbersome review entirely.

The department has long maintained that its legal standard of forgiving loans — "total and permanent disability" — is fundamentally different from that of Social Security, which can always cut off benefits if a patient recovers. But in 2008, Congress passed a law easing the standard for discharge to full disability for at least five years, aligning it closely with a designation made by Social Security for disabilities that aren't expected to improve. Both standards define disability as being unable to "engage in substantial gainful activity.”

Mark Kantrowitz, an author and consultant on student financial aid, said the Education Department still needs to find a way to align its discharge standard with certain Social Security findings "so that disabled borrowers don't have to jump through the same hoops twice."

Tina Brooks, a disabled former policewoman profiled by ProPublica who spent more than five years battling to discharge her federal student loans, said several of the proposed changes would have helped in her struggle. Her biggest concern was whether the department would follow through on its pledge to give specific explanations of denial and communicate clearly with applicants.

"If they are actually are going to say why you are denied, I think it could change the whole program," Brooks said.

The Education Department said that its new rules will ease the burden that the lengthy double review has imposed on borrowers.

"The approach in the proposed rule will streamline the process," the department said. "With the streamlined process, we expect these determinations to be made much more quickly than the Social Security Administration is making determinations."

The regulations noted that the department had adopted its changes after "receiving significant public criticism in February 2011," the month ProPublica published its investigation, in collaboration with the Center for Public Integrity and Chronicle of Higher Education.

The proposed new rules will be open until Aug. 16 for public comments, which will be evaluated by the Education Department for inclusion in the final rule. Final regulations are usually similar to the rules proposed by the department.

Complete total disability where a debtor has severe physical injuries or a severe disease wherein they cannot work for five years or so or even immediately if they are terminal etc.

But, seems this should apply to Any Debtor that has big debts and then suddenly gets a severe illness or severe physical injuries where they cannot work, should Also be forgiven of Paying?

Whats good for a Student Loan non payment or forgiveness should apply to any other debt.  Instead, people get harrassed and or sued in courts or even repossessions of various items.  That disabled person cannot afford hiring lawyers, cannot physically be fighting and going into courts etc.  What the heck, a Federal Law for a Student Loan should be a Federal Law that covers other Disabled people.  ????

Wonder what others think of this?

Jennifer Rosenberg

July 19, 2012, 4:33 p.m.

Private student loans cannot be discharged even in the death of the student borrower, why should someone who is disabled catch a break? Many can still work part time and pay off as much as they can.

Nancy, that law exists for nearly every kind of debt EXCEPT student loans.  It’s called bankruptcy protection, and is a pretty well-balanced system, from what I understand.

The difference is that the Federal government “guarantees” student loans, and the Bush administration attempted to trim the deficit (ha!) by barring student loans from bankruptcy protection, so that the government never needs to foot the bill.

Steven Hambacher

July 20, 2012, 9:36 a.m.

The DOE has been a willing participant in crimes committed by the lenders for years. The lenders interfered with borrowers rights to request discharges by refusing to process discharge requests, lied about reasons for denial and submitted falsified evidence to the DOE. Disabled people have enough to deal with without having banks and the DOE steal their disability benefits. If you are on SSA disability you are disabled. Period.
The whole system of rules including discharges, deferments and bankruptcy are a fraud. They are enforced in an arbitrary and caprecious manner, violate due process and equal protection rights and even violate human trafficing laws.

This article is part of an ongoing investigation:
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College Debt

Total outstanding college debt is estimated at $1 trillion dollars – and with costs still soaring, the burden on students and their families shows no signs of abating. We're examining how the complicated system of college debt is putting the squeeze on families.

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