The Department of Education announced this week they will be sending letters to 387,000 people who have student loans telling them they’ve been identified as eligible to having their loans forgiven under a new student loan debt relief initiative. The student loan relief will be available to borrowers who can’t work due to a disability.
The notification letters will begin going out to these eligible borrowers beginning April 18th and will continue being sent over a 16-week period. A second letter will be sent after 120 days.
These borrowers won’t have to go through the typical process to receive a discharge due to their disability. All the borrower has to do is sign and return a simple application that will be enclosed in the letter. Previously, trying to obtain forgiveness on a student loan was incredibly complicated and long process. The borrower had to submit an unbelievable amount of documentation to prove they qualify.
The Undersecretary of Education, Ted Mitchell, said in a statement, “Americans with disabilities have a right to student loan relief and we need to make it easier, not harder, for them to receive the benefits they are due.”
These forgiven loans will amount to more than $7.7 billion of debt according to the department. Around 180,000 of the identified borrowers are already in default and more than 100,000 are at risk to having their social security checks garnished. The Department of Education matched these borrowers through the Social Security Administration (SSA) database to determine which federal student loan borrowers are receiving disability benefits and whose conditions aren’t expected to improve.
Eligible borrowers not receiving a notification letter can still initiate steps to have their student loan forgiven but there are specific actions required. There are also options for people who are behind on payments when forgiveness isn’t a choice.
These borrowers whose debt will be forgiven need to be aware the debt may still be considered taxable income. For example: if the student loan is $100,000, the borrower may receive an IRS Form 1099-C (cancellation of debt) or 1099-A (Acquisition or Abandonment of Secured Property) that would be filed as earned income. There are exclusions and exceptions, but doing nothing should never be a preference. If the forms are ignored, the IRS will assume that money is income and you may receive additional fees and penalties.
Defaulting on a loan can haunt borrowers for years and seriously hurt credit scores. If you are in default with your student loan, facing hardship or have questions such as tax issues regarding student loans, loan forgiveness or negotiation, contact an attorney who specializes in student loan issues.
Gantenbein Law Firm can assist with your student loan lawsuit. We have had great success helping our clients negotiate, settle or defend private student loan lawsuits. If you are facing student loan debt, or a student loan lawsuit, or you are in eminent default with your student loans, contact Gantenbein Law Firm to schedule your free consult at 303-618-2122.
Our law firm is also successful at making sure your student loan negotiation, settlement or lawsuits do not expose you to tax liability. For more information on our Denver tax attorney, please visit our Tax Law webpage.
Gantenbein Law Firm also specializes in Real Estate Law, Business Law and Estate Planning, Wills & Trusts and Probate. For more information regarding these areas of law, please visit our website at www.gantenbeinlaw.com.