Miscellaneous – Department of Education to Notify Borrowers with Disabilities of Potential Eligibility for Federal Student Loan Discharge

The Department of Education has announced a new process to identify and notify federal student loan borrowers with disabilities who may be eligible for a Total and Permanent Disability (TPD) loan discharge. The Department has worked with the Social Security Administration (SSA) to identify a subset of federal student loan borrowers who receive Social Security disability benefits and meet the eligibility criteria for a TPD loan discharge. Approximately 387,000 current borrowers have been identified. Beginning on April 18, 2016 the Department will send customized letters to these 387,000 borrowers explaining the steps they can take to apply for a TPD loan discharge. Going forward, the Department will work with SSA to identify and notify additional borrowers on a quarterly basis.

Under current law, individuals receiving a TPD discharge generally owe taxes on the forgiven amount, and their income in the year of discharge may appear artificially inflated for purposes of some programs that use taxes to determine income. This includes Medicaid (for people who qualify for Medicaid for reasons other than being eligible for Supplemental Security Income), the Children’s Health Insurance Program, and certain cost savings under the Affordable Care Act. Individuals considering a TPD student loan discharge may wish to consult with a tax professional and, depending on their health insurance, consult with a trained health care navigator and access disability specific help from the National Disability Navigator Resource Collaborative.

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