Obama To Forgive $7.7 Billion In Student Loans For Disabled Americans


The Obama administration announced today that it plans to forgive $7.7 billion in federal student loans held by nearly half a million permanently disabled Americans. The bold move comes as Obama’s final term in office is winding down, and the President looks toward his legacy.

According to the Washington Post, any American with a severe disability is eligible for a federal student loan forgiveness program, but about four years ago, the Obama administration took steps to make it easier for disabled students to discharge their student loan debt burden, allowing disabled student loan holders to use their Social Security disability designation to apply for a forgiveness program. Reportedly, though, few disabled student loan debtors took advantage of the program.

“Too many eligible borrowers were falling through the cracks, unaware they were eligible for relief,” said Education Undersecretary Ted Mitchell in a statement released today. “Americans with disabilities have a right to student loan relief, and we need to make it easier – not harder – for them to receive the benefits they are due.”

Today, however, President Obama has sped things up by announcing the administration’s plan to forgive student loan debt held by disabled Americans, about $7.7 billion dollars in federally held debt. By developing a plan with the Social Security Administration, the Department of Education has been working to identify student loan debt holders who meet the criteria of “permanent disability” or “medical improvement not expected,” and flagging the eligible student loan holders for the Federal forgiveness program.

“The creation of a matching program is a great first step, but the administration needs to go further to ensure that no borrower who has a right to student loan relief has their benefits taken. Borrowers receiving [Social Security Disability Insurance] need these payments to survive,” said Persis Yu of the National Consumer Law center.

The Obama administration’s plan will involve forgiving the debt of almost half a million “permanently disabled” student loan holders by identifying them via their Social Security Disability payments and ensuring that these disabled Americans don’t lose their SSDI benefits as a result of defaulting on student loans. Around 180,000 of the eligible students identified by the Obama administration were perilously close to default on their federal student loans, which would have caused their monthly SSDI payments to be garnished or terminated entirely, depending on the amount due each month.

The Obama administration plans to forgive student loans for permanently disabled Americans starting as early as next week by notifying eligible student loan holders that they can potentially have their student loans forgiven entirely by the Federal government. The letters sent out to student loan holders eligible for debt forgiveness will explain the steps needed to receive a discharge of their student loan debt burden.

“Under the new process we will notify potentially eligible borrowers about the benefit and guide them through the steps needed to discharge their loans,” said Undersecretary of Education Ted Mitchell in a statement released today announcing the Obama administration’s debt forgiveness program.

Eligible permanently disabled individuals will not be required to submit additional documentation, as their eligibility will have already been determined by the Obama administration’s student debt forgiveness program. Disabled borrowers identified as eligible by the Obama administration’s debt forgiveness program will be sent a follow-up letter 120 days after the initial letters go out.

According to the Wall Street Journal, the Obama administration’s plan to forgive $7.7 billion in student debt for permanently disabled Americans is a part of Obama’s “Student Aid Bill of Rights,” an initiative to relieve some of the crippling debt burden faced by many of America’s college graduates.

[Photo by Michael Reynolds/Getty Images]

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