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Disabled borrowers can seek discharge of federal college loans

Many New Jersey students fear that they won't be able to repay college loans upon graduating. For that reason, college financial planning remains a perennial news item. Advisors recommend investigating all interest rate and repayment options before taking on any loans, utilizing any grace periods before beginning payments, and drawing up a budget proposal based on anticipated earnings after graduation.

Indeed, financing a college education is no easy feat. Yet when an unplanned disability hinders an individual's earning potential, it may seem near impossible to keep on top of loan payments, even with the assistance of federal programs like Social Security disability benefits.

However, proposed regulations by the U.S. Department of Education may offer new hope. The new rules would streamline the application process by which a federal student loan borrower who develops a qualifying disability may request loan forgiveness. Under the new process, the DOE would consolidate its initial reviews into a single discharge application. Any denial letters would be required to contain detailed reasons explaining why a loan discharge request was rejected. In addition, borrowers would be able to appoint an attorney or caregiver to receive all of their DOE communications.

However, the process is still distinct from the Social Security Administration's disability application process. Whereas the SSA generally defines a disability as being unable to engage in substantial gainful activity, qualifying individuals under the DOE's loan forgiveness program generally must have a total and permanent disability. That DOE standard may not necessarily include an individual with a condition that, while not technically permanent, is not expected to improve. As a result, it's possible that a disabled individual could qualify for Social Security disability benefits, yet be denied loan discharge relief from the DOE.

If you are unsure whether a physical or mental condition may qualify you for Social Security or other federal disability benefits, an attorney can review your medical records and advise you of your options.

Source: New Jersey 101.5 FM Radio, "Taking On A Student Loan? NJ Banker Offers Tips," Kelly Waldron, July 2, 2012

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