Education Department Adopts Crucial Reform for Disabled Borrowers

November 15, 2012

The Education Department has enacted a crucial reform on behalf of borrowers who become disabled, issuing new rules this month that will make it easier for those borrowers to get their federal student loans forgiven.

The rules, which the department has not publicly announced, for the first time recognize certain disability findings by the Social Security Administration as sufficient grounds to discharge student loans. That step will allow many borrowers to avoid a lengthy double review to determine whether they are truly disabled. Under federal law, borrowers who develop severe and lasting disabilities are entitled to get their loans forgiven.

The reform came after an investigation last year by ProPublica and The Chronicle found that the department's system for evaluating disability was erratic, duplicative, and dysfunctional, and was keeping many genuinely disabled borrowers buried in student debt. The department subsequently promised to revamp the program, but had previously resisted the key reform of waiving a second review for borrowers whom Social Security had already found to suffer from long-term disabilities.

"They are really trying to get this right," said Deanne Loonin, a lawyer with the National Consumer Law Center and the director of its Student Loan Borrower Assistance program, who has been a persistent critic of the department's program.

Ms. Loonin said that the reforms made by the department are "all positive," but that the key question is whether the new rules are put into place effectively. She has estimated that two-thirds of her clients have some kind of Social Security determination.

The new guidelines establish an array of changes that, in combination with the acceptance of certain Social Security findings, represent a sweeping overhaul of the program. They include streamlining the application process by creating a single form and point of contact in the department, improving communication with applicants to better explain denials, and creating a new role for lawyers and family members of disabled borrowers who wish to serve as their representatives. The reforms will go into effect on July 1, 2013.

The Power of Public Comments

The department's reversal on Social Security findings came as a surprise to observers—and followed a lengthy campaign by advocates and lawmakers to persuade the department to overhaul its process.

In May 2011, Sen. Tom Harkin, a Democrat of Iowa and chairman of the Senate's Health, Education, Labor, and Pensions Committee, and Rep. George Miller of California, the top Democrat on the House Committee on Education and the Workforce, wrote a letter to the Education Department calling on it to fix the disability-discharge program in light of the problems identified by ProPublica's investigation.

This past summer, the department proposed new rules that revamped major elements of the program. But it insisted that its legal mandate did not allow it to accept disability findings by Social Security. It was not until nearly 3,000 public comments poured in, most of them including pleas for the department to recognize Social Security findings, that it began to reconsider its position. The comments included a letter signed by more than a dozen consumer and civil-rights organizations and a letter-writing campaign organized by the Institute for College Access and Success.

After receiving the comments, the department opened talks with Social Security and became convinced that its standard for forgiving loans could be tied to the Social Security designation "Medical Improvement Not Expected," which is used to denote long-term disabilities. "We needed a high comfort level," said Gail McLarnon, director of policy coordination in the department's Office of Postsecondary Education. "These are student loans, there's a lot of money on the line here."

She said the department's decision to heed popular demand was an "example of public comments working exactly as it should."

When the new system comes into effect, disabled borrowers will be able to submit award letters from Social Security as proof of their disability. If an award letter says the beneficiary is not scheduled for a medical review for at least 60 months—five years—that means that the borrower has a long-term disability and is immediately eligible to discharge federal loans. (Social Security award letters simply tell you how long it will be until your next disability review, not that the agency has classified you as "Medical Improvement Not Expected.")

Borrowers with more frequent Social Security medical reviews, which correspond to the categories "Medical Improvement Expected" and "Medical Improvement Possible," will still have to undergo a medical review by the Education Department in order to discharge their loans.

This article was co-published with ProPublica.