A year after The Chronicle published a series of articles that described the loan-discharge process for disabled borrowers as “broken” and “duplicative,” the Education Department is taking steps to make it easier for such borrowers to have their student debts forgiven.
At a meeting in Washington Wednesday, department officials proposed streamlining the process so that disabled borrowers with guaranteed loans would have to submit only a single discharge application to the Education Department, rather than applying to multiple lenders and guarantors. The department would check each borrower’s loan record to make sure all of his or her loans were included in the application, and then make the final decision of whether to forgive the loans.
Under existing rules, borrowers who took out loans under the now-defunct guaranteed-loan program must have their discharge approved by each of their loan holders and guarantors, as well as by the department.
Gail McLarnon, the department’s representative on a rule-making panel that is meeting this week, said the change would simplify and speed up the loan-discharge process and provide more consistency in disability determinations. She described the changes as a response to “bad press” that the department has received regarding the discharge process.
Last February, The Chronicle published an investigation by ProPublica that described the plight of an injured former police officer who had been mired for five years in an unsuccessful attempt to persuade the department that she was too disabled to work. The investigation found that the department had ignored its own ombudsman’s recommendations for fixing the discharge process.
In response to the article, the department pledged to streamline the system and begin sharing data with other agencies to reduce the documentation burden on applicants. Officials said they were weighing whether to accept disability determinations made by the Social Security Administration and other federal agencies.
By summertime, however, officials had shelved that plan, saying that the standards the Social Security Administration applies to discharge applications were inconsistent with the department’s own standards, which are set in statute.
For the department’s most recent proposal to take effect, it will have to be approved by a panel of negotiators that is working to craft new rules for the student-loan program. At Wednesday’s meeting, panelists generally embraced the change, but said they would like to preserve a role for guaranty agencies in the process. Betsy Mayotte, director of regulatory compliance and privacy for American Student Assistance, a guarantor, said some guarantors were worried that borrowers would default on their loans because the department had failed to notify the loan holder that the borrower had applied for a loan discharge. (Typically, such borrowers are granted forbearance while their applications are pending.)
Deanne Loonin, an attorney with the National Consumer Law Center, agreed that there would be drawbacks to removing guarantors from the process, because some guarantors help borrowers complete their applications. Still, she said, the benefits that would come from “standardization” would outweigh the drawbacks.
Panelists were cooler to the department’s plan to change the way it monitors borrowers who have been granted disability discharges to ensure that they are not abusing the system. Under existing rules, borrowers must provide the department with proof of their employment earnings for three years, beginning on the date of their discharge. If a borrower makes more than the poverty guideline for a family of two during this time period, or fails to document his or her income, the loan may be reinstated.
At Wednesday’s hearing, department officials proposed tracking borrowers for three calendar years, saying that it is difficult for borrowers to document earnings for partial years. They said more than half of borrowers whose loans are reinstated during the monitoring window either failed to document their income or provided incomplete data.
Ms. Loonin said she didn’t “like the idea at all,” noting that it could extend the monitoring period for some borrowers by almost a year. Ms. Mayotte suggested that borrowers be able to pick their own time frame—either three years from the date of discharge or three calendar years. Ms. McLarnon said the department would consider that approach. Earlier this week, Ms. Loonin had tried to revive the debate over recognizing disability determinations made by the Social Security Administration, suggesting that it be added to the rule-making agenda. Department officials refused.
