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Education Department Bureaucracy Keeps Disabled Borrowers in Debt
Posted on Feb 14, 2011
By Sasha Chavkin, Cezary Podkul, Jeannette Neumann and Ben Protess
More than three-quarters of outstanding student debt is held by the federal government, according to statistics compiled by Mark Kantrowitz, an author and consultant on student financial aid. In the strict world of student loans, even bankruptcy is usually not sufficient reason for debts to be forgiven, and most private loans cannot be discharged for disability regardless of a borrower’s condition.
The Education Department says it has to set its own high bar for debt discharge—and not accept disability findings from Social Security—because of the tough standard set out for it by Congress. Other agencies can always cut off benefits if a patient recovers, it says, while the decision to discharge a loan is permanent.
The department also says that it must be vigilant in protecting taxpayer dollars against fraudulent applications to cancel loans. Until 2000 the department accepted discharges made by government-subsidized lenders. It added its own review only after an audit found that some borrowers were earning wages again after receiving disability discharges.
But experts say the current system often fails to provide disabled borrowers with the relief they are legally entitled to receive.
“It certainly would be a more ethical method, and it would also be more efficient to have the student-loan discharges rely on Social Security Administration determinations instead of having a separate duplicative process,” Kantrowitz says. The disability review by Social Security details the conditions that are eligible, explains how those conditions should be documented, includes a formal process for appeal, and pays for applicants to undergo evaluations by doctors.
Tina Brooks’s accident occurred during police training for bicycle patrol in January 2000, when she fell from her bicycle on an off-road course and tumbled 15 feet down the walls of a rock quarry. Despite years of physical therapy and a spinal-fusion operation, the back pain that resulted from her injuries got so bad that she couldn’t sit, stand, or walk for more than a few minutes at a time.
In 2004 her doctors told her that her condition was permanent. She applied to Social Security for disability benefits, and in 2006 a Social Security judge ruled that she was fully disabled. Brooks thought she was done proving her disability to the government.
But canceling her student debt turned out to be far harder.
Her application to discharge her student debt had been approved by the lender and the guarantor in 2005. But soon after her disability approval from Social Security, Brooks received a letter saying that she needed to resume her payments on her student debt. It came from Affiliated Computer Services (ACS), a contractor hired by the Education Department to provide customer service and manage information for programs including the disability discharge review.
It turned out that the Education Department had rejected Brooks’s application—but she had not received notice when the decision was made, and she had not been provided with a reason for the denial.
Findings by the Government Accountability Office and meeting minutes from the Education Department show that officials repeatedly criticized ACS’s performance. In 2010 the department hired a new contractor, Nelnet, to handle disability discharges. ACS says borrowers received “a consistently high level of service” during its tenure. Nelnet says its communications and application processes are “intuitive, clear, compliant, and up to the department’s high standards.”)
In July 2007, on the advice of a customer service agent from the department, Brooks submitted her entire application again. This time, when she repeatedly contacted the department about her application, it told her that she had not provided enough information. Because the program has no written medical standards, no one could tell her what information she needed to provide.
“It’s so frustrating to not understand what they’re looking for,” Brooks says. “It’s like taking a college exam and it’s blank, but you have to fill in the answers.”
She turned to the federal student-aid ombudsman for help but was told that the department wouldn’t change its decision. “Current regulations do not provide for appeal of decision made by the Department,” the ombudsman wrote to her in August 2008.
So far, Brooks has been able to receive temporary deferments on her payments on the basis of economic hardship, through a separate process that is unrelated to the disability review. But the deferments are scheduled to run out this year, and she says she has no way of paying off her loans. More than $4,000 in interest has accrued during the years Brooks has struggled with the department, swelling her debt to $47,500. Citing legal obligations to protect borrowers’ privacy, the department declines to comment on her case.
Anxious to avoid default, Brooks applied again in December 2010 to discharge her debt. Her application is under review, and she has been advised to expect a decision shortly.
Brooks says that she hasn’t seen any improvements in the program, but that she has to keep on trying: “I don’t have any other choice.”
Disability Payments Garnished
An unpublished 2008 report by the federal student aid ombudsman gave a sense of just how common such failures of communication and bureaucratic obstacles are.
The report analyzed 106 borrower complaints related to disability discharge and found that in 36 percent of those cases, borrowers’ discharge applications had been rejected not because of any questions about their condition, but because their doctors had not adequately responded to requests for additional documentation.
Yet the borrowers were not told that. Instead, they received letters saying only that they were being denied because of “medical review failure.” In 23 percent of the cases reviewed in the report, the borrower had already been determined by Social Security to be disabled.
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