The Student Loan Ranger gets questions from curious readers daily. Some of them are too useful to other consumers to keep to ourselves. This week, we answer questions about disability discharges and student loan repayment penalties.
Dear Student Loan Ranger: I understand that if I’m collecting Social Security disability benefits, I can fast-track a disability discharge of my student loans under certain conditions.
I became disabled in 2004 and began receiving Social Security disability in 2006. From as best as I can tell, I was categorized for a review every 5-7 years as “improvement expected.” Apparently this does not put me in the group of disabled persons who can fast-track a discharge of their student loans.
Since 2006, I have never had my case reviewed by Social Security. During the last 10 years, I have made numerous applications for discharge of my student loans. Every time I had an application pending, the Department of Education did the same thing: They asked for more information and then told me that I did not supply enough information, that more information was needed. And then, after 90 days, my application expired.
I read in the discussion of the new law regarding fast-tracking that if I could show I was disabled for a continuous period of 60 months that I would qualify. In addition, my doctor has represented with each application that I am totally and permanently disabled.
My question: Is there a way to get Social Security to reclassify my review category, given that I am still disabled and that they have not ever reviewed me? It has been more than 10 years since I was awarded Social Security disability, and that was my last review. I am 63 years old now. -T.
Dear T.: Let’s clarify a few things before we dig into your next steps. First, there is no new law for disability discharge for student loans. The U.S. Department of Education recently announced it is proactively reaching out to those borrowers who could be eligible, rather than waiting for these borrowers to figure out for themselves that student loan discharge might be an option.
Second, this isn’t a fast track whatsoever. Potentially eligible borrowers will still have to go through the application process and submit to documentation requests for the three-year conditional period that follows initial approval. What borrowers in this Social Security status don’t have to do is get a doctor to certify their application for disability discharge or submit proof of their Social Security status if the education department already has that.
Now, this doesn’t mean you’re not eligible, but it sounds like applying under the Social Security eligibility clause may be iffy for you. You can also apply at disabilitydischarge.com by having your physician certify your eligibility. Just make sure the doctor fills it out completely and that you follow up promptly with any additional information the Department of Education may request.
As you saw in past attempts, failure to do either of those things results in a rejected application. Unfortunately, due to past fraud on behalf of a few consumers, the department must ensure that all requirements are followed and all documentation of eligibility is very clear.
We have no experience with Social Security benefits so unfortunately we cannot provide advice on whether to attempt to change your status.
In the meantime, you should consider one of the income-driven repayment options as with your minimal income, it will ensure the payments stay affordable, and still have that forgiveness component. -Student Loan Ranger
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Dear Student Loan Ranger: My son owes a small fortune. He paid and paid, then their condo fell into the pit of upside down. They were in economic distress, he quit paying his loan. Now, when back on his feet, he has been trying to catch up — but in the negotiation process, penalties have piled up and he now owes more than he did — way more.
This is insane. I know they have tried to repair this, but I don’t think he should be penalized so heavily when he is trying to make amends. Any suggestions? -Concerned Mom
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Dear Concerned Mom: It’s true that failing to pay one’s student loans can lead to a significant increase in the balance. Not only does interest continue to accrue and capitalize once the loan defaults, but up to 24 percent can also be added in collection costs — and up to 40 percent for some federal Perkins loans.
It’s unfortunate and very stressful to be in the position your son, and many others, were in several years ago. While it may be tempting to worry about the unaffordable bills, such as student loans, later, the price of that delay might be more than you bargained for.
The great thing about federal student loans is the access to lower payment and deferment or forbearance options that can prevent default and ensure that payments are either affordable or postponed. In some cases interest is even deferred or subsidized.
If you or your son, or any other readers, find yourself in this position in the future or now, contact your loan holder right away to find the best way to ensure you don’t end up in default with a significantly higher balance and few options.
Now, let’s get back to your son. Thankfully, there’s a program called rehabilitation that will not only lower the collection costs on the loan to 16 percent, but it will also remove the default line from your son’s credit report. Once the loan is out of default, he will again be eligible for lower payments and other options that will help him keep the loan affordable and on track. -Student Loan Ranger
More from U.S. News
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4 Things Borrowers Don’t Always Know About Parent PLUS Loans
Explore Disability Discharges, Rehabilitation for Student Loans originally appeared on usnews.com
