Sometimes Student Loan Repayment Solutions Aren’t Flashy

When a 50-something student loan borrower lost her hearing and defaulted on her obligation, there weren’t many options left to her loan collector. The borrower sought complete loan forgiveness but it was out of the question, as federal regulations mandate that the borrower be totally and permanently disabled.

“In order for the Education Department to officially approve this totally and permanently disabled forgiveness of a federal student loan, the borrower’s doctor must sign a statement testifying that the borrower can never work again,” explains Christopher Callanan, litigation associate for American Student Assistance^®, the guarantor charged with collecting the loan on the Education Department’s behalf. “Obviously, loss of hearing alone does not preclude someone from working, so the doctor could not complete the TPD form.”

With the TPD forgiveness option off the table, ASA had no option but to try and recover the loan. But the reality of the situation was that the baby boomer borrower, now on Social Security Disability, simply could not pay.

“Student loan guarantors can be faced with federal regulations that challenge both the borrower and the collector,” says Chris. “In this particular case, we were limited in the solutions we could offer.”

Chris conferred with ASA’s ombudsman and together they came up with a solution to temporarily cease collection activity.

“It’s not a permanent resolution, and it’s not particularly ‘splashy’,” concedes Chris. “But it’s mutually beneficial to both parties: the borrower is given more time to fully explore her options and is temporarily spared more drastic steps, like seizure of her Social Security Disability check. At the same time, it keeps the door open for future repayment so that taxpayers don’t have to ultimately foot the bill.

“When we appreciate the challenges of a borrower, it makes it easier for them, in turn, to appreciate our challenges as a collector.”