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California Association of Private Postsecondary Schools

Education Dept. Releases Rules for Disability Discharge, Repayment

11/02/2012

Inside Higher Ed - November 2, 2012

The Education Department on Thursday released final rules to make income-contingent repayment more generous and to make it easier for permanent disabled borrowers to discharge their loans. The rules, the result of negotiated rule-making sessions early this year, bring the income-contingent repayment program in line with an executive order President Obama issued in January. The new program, now officially named "Pay As You Earn," reduces monthly payments to 10 percent of a borrowers' discretionary income for borrowers in financial distress and discharge the loans after 20 years.

For borrowers who are permanently disabled, the rules take several steps to streamline the discharge process, including accepting the Social Security Administration's designation of disability and simplifying the process so that disabled borrowers must submit only one application to the Education Department, rather than separate applications to each of their loan servicers.