President Obama Forgives Student Loans

On Mon., April 18, the Obama administration began sending out letters to those who qualify for a student loan forgiveness option due to severe or permanent disability. The number of letters sent to those identified as eligible for the already existing federal loan forgiveness program are totaling nearly 400,000.

This new campaign is designed to help disabled Americans in the process of discharging student loans. Of the near 400,000 individuals being sent letters to make them more aware of this forgiveness option, 179,000 are already in default. After announcing this plan, the United States Department of Education said that the loans eligible for forgiveness as part of this program add up to about $7.8 billion.

Included in the letter is an application for participation to simply be signed and returned. Applicants are not required to prove eligibility for the program. Once the loans are forgiven, a three-year monitoring period will follow. If the eligible person is discovered to be earning above a certain amount, they may be required to make payments again.

Ted Mitchell, the Undersecretary of Education, said to the Associated Press in an interview, “These are people who are struggling with health issues. We want to take one worry off their plate.” The Department of Education has worked with the Social Security Administration to find those deemed permanently disabled and receiving disability payments, yet still had loans.

Persis Yu, Project Director at the National Consumer Law Center, told Associated Press, “Many Social Security Disability recipients qualify for loan cancelation, yet most do not know about the discharge program.” While Yu did praise the plan, she stated that she wished it went a little further by stopping collections and garnishment on borrowers.

The Obama administration included in its 2017 budget proposal to Congress a request to get rid of tax penalties for disability discharges. Until then, those who take advantage of the program may still pay taxes on the forgiven loans.

The program is being largely applauded, especially by advocates of disability rights. Mitchell said, “Americans with disabilities have a right to student loan relief. And we need to make it easier, not harder, for them to receive the benefits they are due.”