Proposal Would Ease Student-Loan Forgiveness for Disabled Borrowers

July 16, 2012

A series of regulations that would streamline the loan-discharge process for disabled borrowers has moved a step closer to being approved, as the Department of Education is scheduled to officially release on Tuesday a package of rules that would make it easier for disabled borrowers to have their loans forgiven.

Under the proposed rules, borrowers with federally guaranteed loans would have to submit only one discharge application to the Education Department rather than having to notify each lender and guarantee agency separately. The regulation would affect Perkins Loans and loans disbursed through the now-defunct Federal Family Educational Loan Program.

Borrowers with loans held by the federal government would continue to submit such requests directly to the Education Department.

A February 2011 ProPublica investigation, published by The Chronicle, found that the loan-discharge process for disabled borrowers was burdensome and difficult to navigate. The department said that the "significant public criticism" had prompted it to take a closer look at the process and to develop regulations to fix it.

The rules were formulate through a negotiated rule-making process over the past year.

In 2011 more than 78,000 borrowers of federally owned, federally supported loans applied for a discharge of their debts due to a "total and permanent disability," according to the Education Department.

The department will collect public comments on the proposal for the next 20 days before issuing a final version of the rules.