Lawmakers are calling for an investigation into a troubled student loan discharge program one day after an NPR report revealed that the program — meant to erase the student debts of borrowers with significant, permanent disabilities — wasn’t helping the vast majority of those who are eligible.
According to data provided to NPR by a U.S. Education Department official, only 28% of eligible borrowers identified by the department between March 2016 and September 2019 have either had their loans erased, as federal law provides, or are on track for that to happen.
“We are alarmed by the findings in this NPR investigation,” a bipartisan group of lawmakers, led by Sen. Chris Coons (D-Del.), say in a letter to be sent Thursday to Education Department Acting Inspector General Sandra D. Bruce.
“We write with serious concern about the Department of Education’s (ED) process to discharge federal student loans for totally and permanently disabled Americans, including veterans.”
The troubled loan discharge process begins with the Education Department identifying eligible borrowers by comparing federal student loan records with Social Security Administration records of individuals who have been categorized by that agency to have the most severe kind of disability: Medical Improvement Not Expected (MINE).
These borrowers are then sent letters informing them of their eligibility to have their outstanding federal student loans discharged. But it’s not automatic. Borrowers must respond to the notice and apply for debt erasure. And NPR found that, of the 555,000 borrowers the department identified between March 2016 and September 2019, just 200,000 — or 36% — applied and were conditionally approved.
“A lot of folks have disabilities that, frankly, prevent them from going through the process,” says Persis Yu of the National Consumer Law Center. For example, a borrower with dementia or whose condition may require long hospital stays may struggle to keep up with paperwork requirements.
Even borrowers who respond to the Education Department’s notice and are conditionally approved to have their student loans discharged, still fail to complete the program. That’s because conditionally approved borrowers must also complete three years of income verification. Data provided to NPR from a department official show that, from March 2016 to September 2019, 75,000 eligible borrowers were failed out of the program, and subsequently had their loans reinstated, almost all of them for failing to submit the required income-verification paperwork on time.
These borrowers have the right to appeal the reinstatement of their loans, but NPR found that, of the 75,000 borrowers who failed out of the program, only 31,000 successfully appealed and 44,000 — more than half — have so far failed to do so.
This process of rejecting eligible borrowers over paperwork issues has created an enormous amount of extra work for everyone involved, says Allison Bawden, who investigated the program for the U.S. Government Accountability Office, a federal watchdog, in 2016. “It begins this sort of bureaucratic circle where you first apply, then you get kicked out, then you come back in through appeal, and it’s understandably frustrating.”
The lawmakers’ letter to the department’s inspector general also cites concerns over the department’s lack of transparency with Congress. Despite lawmakers’ previous requests for data about the loan discharge program, the letter says, the Education Department provided them little information.
And NPR found that one of the most important details the department did report to Congress — that it was successfully discharging the loans of 40% of borrowers with significant, permanent disabilities — appeared to be inaccurate. Instead, NPR found, after accounting for the tens of thousands of borrowers who had their loans reinstated during the process, just 28% of eligible borrowers either had their loans erased or remain on track for that to happen.
A department official told NPR that 40% was “based on the number of borrowers receiving upfront … discharges,” but the department could not provide NPR with the numbers to substantiate that figure, nor could it tell NPR the time period that 40% reflected.
The lawmakers’ letter takes issue with “the reported extremely low rate of loan discharges for eligible borrowers, and the contrast between the NPR report and the information previously provided by ED.”
“Most importantly, it appears that ED’s process for TPD [totally and permanently disabled] loan discharges is failing to provide student loan relief to hundreds of thousands of Americans, including veterans, who are entitled to this relief under the law,” the letter says. “We urge ED’s Office of Inspector General to investigate the TPD loan discharge process immediately.”
The letter also urges the inspector general to explore what needs to be done “to make this process automatic, meaning once a borrower is flagged as eligible, the discharge is not contingent upon administrative work by the borrower at the point of discharge or any point thereafter.”
The letter has the support of a bipartisan collection of lawmakers, including Sens. Coons, Susan Collins (R-Maine), Tammy Duckworth (D-Ill.) and Rob Portman (R-Ohio).
In response to NPR’s findings, a department official said the department has made incremental improvements to the process since 2016: “We continue to look for ways to make the process easier to navigate for disabled student loan borrowers, while maintaining the integrity of the taxpayers dollars associated with the discharges.”
Top lawmakers on both the House and Senate education committees also reacted strongly to NPR’s findings. Rep. Bobby Scott (D-Va.), the chairman of the House committee, said in a statement:
“Unfortunately, students with permanent disabilities — who are entitled to debt relief — are trapped in a bureaucratic web. The Education Department has the ability to implement automatic discharge of these loans. The Department should use its power to give these hundreds of thousands of students the relief they deserve.”
Sen. Patty Murray (D-Wash.), the top Democrat on the Senate education committee, said in a statement:
“It’s unacceptable that tens of thousands of Americans with disabilities are being denied loan discharges that they need and are eligible for. This is a problem the Department of Education can and should solve, and I plan to continue to push Secretary DeVos to fulfill our commitment to ensuring every American who has significant and permanent disabilities can have their outstanding federal loans discharged.”
Sen. Lamar Alexander (R-Tenn.), the chairman of the Senate education committee, has long championed efforts to simplify the income-verification process in multiple federal student loan programs, including the loan discharge program for borrowers with disabilities. On Thursday, Alexander oversaw Senate passage of a bill that, he says, would do just that.
The legislation would eliminate the need for borrowers to repeatedly verify their income with the Education Department.
In a statement, Alexander said, “[The bill] should eliminate most of the so-called ‘verification’ process, which is a bureaucratic nightmare” that millions of students “go through annually to make sure the information they gave to the Department of Education is exactly the same as they gave to the IRS.”
The bill now heads to the House.