Home > 2016 > Students

How to Qualify for Obama’s New Student Loan Forgiveness Measure

Advertiser Disclosure Comments 1 Comment

The Obama administration announced Tuesday a plan to forgive $7.7 billion in federal student loans held by an estimated 387,000 permanently disabled Americans, of which roughly half (179,000) are in default.

[Advertisement: If your credit score is low, it may be due to credit errors. Lexington Law can help fix these errors. Visit their website or call (888) 586-1062 for a free consultation.]

While the administration tried to streamline the discharge of student loans for the permanently disabled four years ago, few eligible borrowers took advantage. Now, the Department of Education is starting to identify and reach out to eligible borrowers to help them take the necessary steps to discharge their loans.

“In 2012, the Administration took steps to streamline the process to allow for Americans who are totally and permanently disabled (TPD) to use their Social Security designation to apply to have their loans discharged. But too many eligible borrowers were falling through the cracks, unaware they were eligible for relief,” U.S. Education Under Secretary Ted Mitchell said in a prepared statement. “Under the new process, we will notify potentially eligible borrowers about the benefit and guide them through steps needed to discharge their loans, helping thousands of borrowers. 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.”

Starting April 18, borrowers identified in the match will receive a letter from the government explaining the steps needed to receive a discharge. They will not be required to submit documentation of their eligibility, unlike disabled borrowers who apply for the discharge on their own. Notification letters will be sent over a 16-week period and followed up with a second letter after 120 days.

The letters will inform borrowers of the tax implication of the discharge, since the government can tax the loan amount forgiven. While the President’s 2017 Budget proposal seeks to exclude TPD discharges and other Department of Education loan forgiveness programs from taxable income, it will require Congressional action to make that happen.

What to Do If You’re Eligible But Not Contacted

Eligible borrowers who do not receive notification from the Education department can initiate the necessary steps to have their student loans forgiven by following the steps outlined on an Education department website:

  1. If you are a veteran, you can submit documentation from the U.S. Department of Veterans Affairs showing that the VA has determined that you are unemployable due to a service-connected disability;
  2. If you are receiving Social Security Disability Insurance or Supplemental Security Income benefits, you can submit a Social Security Administration notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination; or
  3. You can submit certification from a physician that you are totally and permanently disabled. Your physician must certify that you are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that:
  • Can be expected to result in death;
  • Has lasted for a continuous period of no less than 60 months; or
  • Can be expected to last for a continuous period of no less than 60 months.

Initial notification letters will be sent over a 16-week period and will be followed up with a second letter that will be sent 120 days after the initial letter if a signed application is not received. Notification will also include information to ensure borrowers understand the potential tax implications for this benefit and can make an informed decision about electing a discharge.

Help for Non-Eligible Student Loan Borrowers

Defaulting on a loan seriously damages your credit score, and because student loans are rarely discharged in bankruptcy, the debt can beat down on you for decades. (You can see how your student loans are currently impacting your credit scores for free on Credit.com.)

There are some options for people who are behind on payments to get back on track, though, even if forgiveness isn’t an option. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan, or you can go through the government’s default rehabilitation program. If you make nine consecutive on-time payments (the payments can be extremely low), your account goes back into good standing, and the default is removed from your credit report.

More on Student Loans:

Image: Nick White

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Greg

    Problem with SSI or SSDI. “If you are receiving Social Security Disability Insurance or Supplemental Security Income benefits, you can submit a Social Security Administration notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination” THE PROBLEM IS THE LOCAL SS OFFICES DO NOT ISSUE SUCH STATEMENTS OF REVIEW. THEY REVIEW ON A RANDOM BASIS AND WILL NOT ISSUE A LETTER LIKE THEY ARE ASKING FOR. Been down this road.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team