Crowe & Shanahan
Serving Clients Throughout Eastern Missouri and Southern Illinois
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Disabled and strapped with student loans

Higher education is often held as providing the means of obtaining a job and greater income. It is somewhat ironic that in order to obtain a degree, many have to burden themselves with student loans to afford that education. This is not a problem if they find a good job, but such "good" jobs are becoming more difficult to find in our increasingly volatile job market.

One problem with student loans is that should something go wrong on that path to a good job, there is virtually no way to get out from under that loan repayment obligation. They are very difficult to discharge in bankruptcy and if you are stuck in a low paying job, it could take decades to pay them off. Even worse, what if you become disabled during that time and can no longer work?

What is even more ironic is when problems are made worse by a lack of coordination between government agencies. One example of this occurs when loan forgiveness is offered to an individual. The Internal Revenue Service typically treats loan forgiveness as income and it generates a tax obligation to the recipient. 

Currently, almost 400,000 individuals have been determined to be disabled by SSA but are saddled with student loan debt. One senator is arguing that they should be granted loan forgiveness from the Department of Education and that the IRS should grant them an exemption from the usual requirement that they file elaborate documentation that proves their medical condition has left them disabled. Without this, their loan forgiveness triggers a tax obligation to the IRS.

It is a waste of resources, as few SSD recipients have any assets from which the IRS could collect. Their  average net worth is $200, making virtually any collection activity pointless. It is also would require far too much effort by the disabled and too much time from the IRS to process these unnecessary forms.

Given the difficulty of obtaining SSD benefits, there should be a seamless process to allow them to obtain educational loan forgiveness without the risk of leaving them with a tax liability.

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