The Obama Administration announced a number of relief options for borrowers this week, including new ways to help disabled borrowers. This has been overshadowed by other news on student loans this week, but it is criticially important. We have been calling on the Administration for some time to stop collecting from Social Security Disability Insurance (SSDI) recipients and instead help them figure out eligibility for disability discharge.
The Administration announced that beginning in 2016, the Department of Education and the Social Security Administration will conduct regular data matches to identify federal student loan borrowers who may be eligible for a disability discharge. Once identified, the Department will take steps to stop collection actions “…to ensure that that borrower’s Social Security disability insurance benefits are not reduced to repay the student loans.” The announcement says that the Department and SSA are working on ways to identity these borrowers.
We urge the agencies to work quickly on this data match project. It should not be too difficult for the Social Security Administration to provide information about people who are receiving payments from them. This should be a straightforward matter: SSA will identify people who are receiving SSI or SSDI and alert the Department of Education and Treasury if necessary to stop offsetting SSDI and make sure borrowers get the relief they are entitled to. A simple concept, but one that the government is not currently doing. It is even more straightforward to do this now that the Department of Education accepts many SSDI determinations as presumptive proof of eligibility for disability discharge. (Note that there should be no offsets of Supplemental Security Income (SSI) payments).
The Administration and Congress must also act to ensure that disabled borrowers that do get discharges are not then hit with potentially devastating tax bills. Unfortunately, under current policy, the amounts written off through disability discharge are potentially taxable income.
Stay tuned for more news and don’t forget that Monday July 13 is the deadline to send comments to the Consumer Financial Protection Bureau about student loan servicing. NCLC will post our comments on Monday.
