You may even be eligible to start the process to have the balance of your loans forgiven, after you have regularly made your affordable payments for a period of years. Click here for information on finding out whether your loans are private or federally-guaranteed. The Department of Education is reaching out to disabled borrowers about their eligibility for a student loan discharge. Disabled borrowers contacted by the Department of Education will only have to sign and return the application to be approved. Borrowers need to be on high alert for debt-relief companies that make repayment promises they cana€™t keep a€“ like being able to get rid of your loans for you. Defaulted loans come with serious consequences, including the potential loss of certain government payments.
This new initiative aims to help these borrowers keep those benefits and inform them of the discharge theya€™re entitled to. To fulfill that desire to make things easier, the department has taken certain steps to change the process. Because the department certified these borrowersa€™ disability status with the Social Security Administration, they get to bypass the documentation typically needed to prove their eligibility. If a borrower does not send a completed application after 120 days, the department will reach out to them again to let them know they qualify.
Borrowers who are approved for discharge will be monitored for three years, when they may be required to submit income or other documentation to verify they remain eligible for the discharge status. While getting rid of a loan can be a great relief for many borrowers, it may not make sense in every situation. That amount may be considered taxable income, depending on the borrowera€™s situation, which means you may simply replace a student loan bill with a tax bill.

Even with this consideration, this is another recent instance of the department looking out for borrowers. Ryan Lane is the senior editor for American Student Assistance, where he oversees the financial website and its online community, SALT Central. Loan Ranger, currently authored by American Student AssistanceA®, helps prospective and current students and recent graduates make sense of borrowing options, student debt and loan repayment.
In July, the Department of Education announced changes to its federal student loan servicer team, meaning borrowers may soon see their loans transferred to different companies. Though the Education Department hopes the transition will go smoothly, as stated in the announcements, those with student loans may want to take a proactive approach to the changes. Many services, like automatic payments and correspondence preferences, will not carry over to the new servicer. Because the debt collector who keeps calling you or your loan servicer may not tell you about your best options, or how to get a monthly payment that you can afford. However, the president did outline steps in his Student Aid Bill of Rights to make it easier for borrowers to understand how to manage their loans or when they may be eligible for discharge a€“ and one of them was implemented just last week.
Department of Education sent a letter to approximately 387,000 federal student loan borrowers letting them know they may be eligible for what's known as the total and permanent disability discharge.
This can have a dramatic effect on those with disabilities, especially if it causes them to have a portion of their Social Security disability payments seized. Instead, they simply sign and return their application to receive this discharge a€“ thata€™s it.
This is an important step since borrowers often ignore their student loan-related communications, especially if theya€™re in default. Ita€™s important that these borrowers or their representatives respond to each one of these notices, or run the risk of having the loans reinstated.

So, if you or a family member suffers from a disability, pay extra attention to any communications from the department. Thata€™s because when a loan is discharged, the department reports any balance of more than $600 to the IRS.
Before applying for this discharge, you may want to consult a tax professional to understand how it will affect your financial situation. Thata€™s something all borrowers should be happy about, even if they dona€™t qualify for loan forgiveness or discharge. With the end of a contract with the Direct Loan Servicing Center (ACS), loans will be transferred to FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Nelnet and Sallie Mae during the next several months, a July 12 announcement said.
Accounts with COSTEP, EDGEucation Loans and EdManage will be transferred to MOHELA; KSA Servicing loans will be transferred to Aspire Resources Inc. Minsky, a Boston lawyer specializing in student loan law, said he has had several people contact him as they receive transfer notification. The department estimates approximately 179,000 of these borrowers are in default, and thata€™s an important point for this population. The July 26 announcement says the loan-servicing platform used by the four nonprofit servicers will no longer be available.

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