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Financial Services Law Insights and Observations

State student loan ombudspersons push for automatic student loan discharges for disabled civilian borrowers

State Issues Student Lending Department of Education Debt Cancellation Higher Education Act

State Issues

On March 3, student loan ombudspersons from seven states and the District of Columbia sent a joint letter to U.S. Department of Education (Department) Secretary Betsy DeVos and Social Security Administration (SSA) Commissioner Andrew Saul advocating for the automatic discharge of student loans for eligible borrowers under the Total and Permanent Disability (TPD) loan discharge program. Describing the current TPD program’s application process as “onerous,” the letter cites to the Department’s implementation of a presidential directive in 2019 that granted automatic student loan discharges to disabled veterans (covered by InfoBytes here), as an example of how to provide relief to borrowers “without further burdening them with a cumbersome application process.”

As asserted by the ombudspersons, the Higher Education Act of 1965 makes clear that a qualifying borrower’s loans shall be discharged if the borrower is (i) “permanently and totally disabled,” or (ii) “is ‘unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months.” The ombudspersons claim that the current TPD program’s application process is difficult for disabled borrowers to complete, and the difficulties posed by the annual documentation submission requirement during the post-discharge three-year monitoring period poses a risk of “having the[] discharged loans reinstated.” The student loan ombudspersons urged the Department and the SSA to work together to allow the Secretary to accept information shared by the SSA that the borrower is permanently disabled for the purpose of granting the discharge of student loan debt, and to minimize or eliminate the need for borrowers to proactively participate in the post-discharge monitoring process.

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