Catastrophic illnesses and accidents sometimes render people unable to work. Many lawyers and members of the general public are unaware that people who cannot work because they are permanently and totally disabled may be eligible to totally discharge their federally financed student loans. We at DailyKos can help spread the word to disabled people for whom help may be available. The process does not involve bankruptcy, does not require filing for SSI, SSDI or need-based income support programs, and may be relatively straightforward for those who are eligible. Here's how: And here's a LINK for the form that must be submitted, one for each outstanding loan.
Recently, DK’s Kath25 has pointed out that many Kossacks as well as members of the general public are overwhelmed with educational debts. These debts are virtually impossible to discharge in bankruptcy, regardless of one’s financial condition and one’s ability to pay. Meanwhile, nyceve reminds us of the many Americans have overwhelmingly serious medical conditions that render them permanently and totally disabled and simultaneously saddle them with medical debts that they may never be able to repay.
When these disabled persons have student loan debt, it may be impossible for them to pay it back, exacerbating burden of the cost of their medical care and their inability to work and support themselves. Some disabled persons have income from SSI or SSDI, but once student loans become late or go into default, the disabled may lose all access to credit cards, car loans, mortgages and other credit based financial functions.
Moreover, if a person receiving SSI or SSDI fails to pay federally subsidized student loans, then the federal government may deduct monies from those meager subsistence program payment for repayment of the disabled person’s student loan debts:
The Department of Education's regulations permit administrative discharge upon a showing of "total and permanent disability." 34 C.F.R. 682.402(c) (GSL program), 685.212(b) (Direct Loans), 674.61(b) (Perkins Loans). Under the regulations, an individual is totally and permanently disabled if he "is unable to work and earn money because of an injury or illness that is expected to continue indefinitely or result in death." 34 C.F.R. 682.200. US SUPREME COURT EXPLAINS
People who find themselves most in the vortex of these two factors – permanent and totally disabled with student loan debts outstanding or in default – may be eligible for help. The United States Code of Federal Regulations, particularly 34 C.F.R. 674.61(b), entitled "Discharge for Death or Disability" provides that the Federal Government will assume responsibility for repaying student loans when a person becomes permanently and totally disabled and therefore is unable to repay the loans him/herself.
To access this relief, it is not necessary that the person have been previous declared disabled or be receiving SSI or SSDI payments. It is sufficient that the patient have their regular doctor fill one discharge form including the doctor’s original signature for each of the holders of patient’s loans. Then, the patient or his representative submits those discharge forms to each of the holders of those educations debts.
In many cases, disabled persons who are eligible for this debt relief will also be eligible for free legal assistance from a local Legal Services office to help them successfully and accurately complete the required steps. This link allows members of the public to locate their local legal services office by indicating their state and county of residence.
According to the United States Department of Education,
To apply for a loan discharge due to permanent and total disability . . . [one] must submit a discharge application to the Direct Loan Servicing Center. The application must be certified by a doctor. US DEPARTMENT OF EDUCATION WEBSITE
However,
ED will not approve a request for discharge for permanent and total disability for a condition that existed before I applied for any of the loans that I am consolidating unless a doctor certifies that the condition substantially deteriorated after the loan(s) was made, rendering me totally and permanently disabled. US DEPT. OF ED.
This Department of Education document explains how the loan discharge procedure works and how the Department of Education considers applications for loan discharge.
The Department’s Disability Discharge Operating Unit will conduct an initial review of all discharge requests that have been assigned by a Perkins school lender or a guaranty agency or transferred from the Direct Loan Servicer or FSA Collections.
The Operating Unit will review the discharge request packages for completeness. Any incomplete packages will be returned to the holder of the loan for resubmission. Any questionable preliminary determinations (e.g., a borrower that clearly does not meet the definition) may also be returned to the holder. The Department will monitor determinations made by loan holders to ensure that holders and guaranty agencies are properly reviewing the applications they receive.
In many cases a borrower will have submitted disability discharge requests to more than one loan holder. The Operating Unit will, to the extent possible, conduct a consolidated review of all discharge requests for a borrower to determine the borrower’s eligibility for discharge.
If necessary, the Operating Unit will contact the physician or prior holder for any additional information it believes is necessary to make an initial determination of the borrower’s eligibility for a discharge. The initial and final review of an application will be combined if, at the time the loan is assigned or transferred, three years has elapsed since the date that the borrower became totally and permanently disabled, as certified by the physician. OPERATING INSTRUCTIONS
Under Federal law, once the holders of the loans have received these forms with the doctor’s original signature from disabled people, the holders are obliged discontinue collections procedures, process the discharge requests, and grant conditional discharges of the loans, unless more information is needed to make a determination.
If, after three years, the disabled person has remained unable to work for the foreseeable future, then the federally subsidized student loans must be permanently discharged, which means that they no exist. CONDITIONAL DISCHARGE INSTRUCTIONS The Government assumes the responsibility for repaying these loans since the disabled person has proven unable to do so by reason of permanent and total disability.
Obviously, this solution is not for everyone with student loan debt. A person who is working or who can work will not be eligible. In order to access this solution, the permanently disabled debtor must have one doctor who is licensed to practice in an American state or territory sign a form attesting to the permanent and total disability of the patient.
Here is a form, for example, that permanently and totally disabled students who attended Brown University might submit to commence a discharge of student loans taken out while at Brown University.
Although obtaining the doctor’s signature may be a straightforward procedure for someone who is clearly permanently and totally disabled, there are significant pitfalls of which the patient and his attorney/representative should be aware. For example, it the patient’s physician must state on the discharge form the date upon which the patient became disabled. This is not necessarily the date when the person became disabled for purposes of other federal benefits.
The doctor uses his professional judgment to make this determination, however, only the loans that were taken out before the date of disability will be discharged. As a practical matter, the patient must know at the time of seeking the doctor’s signature the exact dates on which each of his outstanding student loans were taken out. Otherwise, there is the risk of the doctor certifying a disability date that will not provide the debt relief that the disabled person needs. The only responsible way for an attorney to handle this problem, particularly for a patient with a psychiatric illness, may be to access the patient’s credit reports in order to assemble a complete list of all outstanding student loans to be discharged.
Because students often assume many loans in the course of their schooling, and these loans are subsequently sold over and over again to different holders, disabled people may not have a full record of all of their loans and it may be quite difficult to identify all of the current holders for the purpose of seeking to have those holders discharge the loans. Therefore, it is essential to conduct a credit check with the major credit reporting services to identify all of the outstanding loan holders so that each may receive a discharge form with an original signature from the disabled person’s doctor. Otherwise, it would be possible to attempt to relieve the disabled person’s indebtedness, but fail to restore credit because one or more loans remain outstanding, late or in default.
This diary is just for the purpose of informing the public and is not legal advice. Although it may be quite clear to doctor and patient that the patient meets the medical requirements, still determining the correct disability date and submitting orginal forms to all of the loan holders is necessary to successfully complete the process, discharge the disabled person's student loans, and rehabilitate credit. This may well require the assistance of an attorney. You may need to inform your private practice bankruptcy or other attorney of the existence of this regulation.
Again, this Legal Services link allows the public to locate non-profit local Legal Services offices where free help may be available by state.
And this LINK is to the form that must be signed by a doctor and submitted to the loan holder, one form with original signature for each loan you have outstanding.