Student Loan Discharge Due to Disability

confused manWritten by Charleston Bankruptcy Lawyer, Russell DeMott

There’s some good news for disabled student loan borrowers.

Student loans are a huge problem. Absent “undue hardship,” which is nearly impossible to prove in most instances, student loans are non-dischargeable in bankruptcy.

However, bankruptcy isn’t your only option. Anyone with student loan problems should first try every other available option prior to exploring bankruptcy. One way to discharge government-backed student loans is to prove disability.

U.S. Department of Education Rule Change

The U.S. Department of education recently issued a rule change regarding how disability is determined.  The new policy doesn’t go into effect until July of 2013, but it’s a promising development in which the government has applied some much-needed common sense to this issue.

Under the new rule, if a student loan borrower is declared totally and permanently disabled by the Social Security Administration, the borrower will be deemed disabled by the Department of Education.  In turn, the borrower can petition for forgiveness of the student loans because of the disability.

A common sense result

What this means is this: if one department of the government (the Social Security Administration) rules that a borrower is disabled, another department of the government (the Department of Education) will recognize that finding, rather than conduct a review on its own.  In a courtroom setting this would be called, “judicial economy.”  It’s just common sense for the Department of Education to defer to the Social Security Administration on this issue.  The Social Security Administration, after all, has a mini-judicial system in place to make these determinations (attorneys, administrative law judges, etc.)  Thankfully, the Department of Education finally realized the error of its inefficient ways.

There’s a wrinkle

The new rule only applies to those the Social Security Administration puts on a five to seven year review schedule, not those on a three to five year review schedule.  Those with a longer review period are, predictably, more severely disabled and less likely to return to work.

Again, these new rules don’t apply until July of 2013, but the changes are a welcome dose of common sense. According to the Chronicle of Higher Education, last year 78,000 borrowers applied for a discharge of their student loans on the basis of disability.



  1. Rob says:

    I was awarded TCD 5-7 year review schedule. I am just now applying for student loan forgiveness with my loan holder. Should I abort this process to apply after July 13? In other words, will being denied from this round prevent me from reapplying when the “rule” is in effect?

    Thanks in advance.


  2. Russell DeMott says:

    Thanks for your comment. I can’t give legal advice via a comment forum. If you’re in SC, call me. If not, you’ll need to contact an attorney in your state.

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