President Obama’s new student loan discharge program can ease the financial hardships of disabled borrowers.
If you’re among the 400,00 permanently disabled student loan borrowers, no one needs to tell you that making student loan payments on SSDI is next to impossible. The Obama administration recently took bold steps to make sure your student loans will be discharged.
Although permanently disabled student loan borrowers have had the option of seeking loan forgiveness, the process was long and complicated, leading many eligible students to forgo loan discharge.
Four years ago, the Administration worked to streamline the process, making it less complicated and removing barriers to loan discharge. Even with those changes, very few borrowers utilized the program. Here is a summary of the new plan:
- Working in conjunction with the Social Security Administration (SSA) the Department of Education has so far identified over 387,000 eligible student loan borrowers. Of those 387,000, approximately 179,000 are in default, running the risk of having their SSDI benefits garnished in order to pay their student loans.
- Individuals who have been identified by the Department of Education and the SSA will receive written notification over the next four months. Eligible borrowers will not have to submit supporting documentation under this program.
Tax Implications
If you’re among the eligible borrowers and have your student loans discharged for forgiven, the loan balance could be considered taxable income depending on your individual financial circumstances.
Although individual disability-related student loan forgiveness programs are already in place, this new program is part of the Obama Administration’s Student Loan Bill of Rights and is designed to make the process more accessible and less complicated.
Eligible borrowers will not only receive a letter in the coming weeks, but also guidance on how to better navigate the student loan discharge process.
For many struggling disabled student loan borrowers, this program could mean the difference between peace of mind and ongoing financial hardship.
Always refer your specific tax questions to a licensed tax professional.
