Since 2007 Linda Carrasquillo has been unable to work due to an injury she suffered at her job cleaning buses.
And yet, every month for seven years, the government took great pains to collect on a $4,000 loan she took out to pay for her daughter’s schooling — by withholding part of the money she received through her Social Security disability benefits.
Depending on the year, the amount the government took each month to repay the old student loan ranged from $35 to $103. That was money she could have used. During the period the government collected on her debt, Carrasquillo’s health suffered. She began dialysis and underwent surgery for a kidney transplant, which required her to travel frequently to Philadelphia, where her doctor was based, from her home in Queens.
“It might sound like a little money, but for a person in my situation it’s a lot…$100 is a lot, $50 is a lot,” Carrasquillo, 62, said. She was left with $750 per month, the minimum in benefits the government is required to leave borrowers. “It was a very big strain on my life.”
Feeling stressed by the loan, Carrasquillo and her daughter called the nonprofit organization collecting the debt on behalf of the federal government to see if she could work out a deal. But they couldn’t come to an arrangement Carrasquillo could afford. Eventually she fell behind on her rent and faced the possibility of eviction.
But what Carrasquillo didn’t know is that the entire time she was struggling to manage her limited finances, the government should have never been collecting on her debt. She qualified for what’s known as a total and permanent disability discharge, which allows borrowers to have their federal student loans wiped away if they have a physical or mental disability that makes it impossible for them to work.
Recently, Carrasquillo finally got the more than $4,000 the government garnished from her Social Security checks back — but it took a lawsuit. She’s one of nine plaintiffs in a case brought by Brooklyn Legal Services, a division of Legal Services NYC, in 2016 against multiple federal agencies that settled last month. In total, the plaintiffs got back nearly $23,000 that was garnished from their disability benefits to repay their student loans.
Carrasquillo said if she hadn’t met Johnson Tyler, the attorney who represented the borrowers, she would never have known she was entitled to have her debt discharged. “There was a lot of things that weren’t revealed to me,” Carrasquillo said. “They weren’t truthful. We’re trying to help our children and they just take advantage of us.”
Borrowers are often unaware of their right to fight the government
The case highlights the challenges borrowers face accessing the benefits and protections guaranteed to them in a federal student loan system that has extraordinary power at its disposal to collect. When a borrower defaults on their federal student loan, the government can garnish their Social Security benefits, wages and tax refunds to get its money back.
Borrowers have the right to mitigate or avoid these consequences by taking certain steps — including, if they’re disabled, filing for a disability discharge. But borrower advocates have complained for years that a lack of information from the government and the companies and nonprofit organizations it hires to manage the student loan program have meant struggling borrowers face challenges accessing the lifelines to which they’re entitled.
In 2015, the government garnished the Social Security benefits of nearly 114,000 borrowers over 50. Of those, more than half were receiving Social Security disability benefits, not Social Security retirement benefits, according to a 2016 report from the Government Accountability Office.
The Department of Education “should be trying to make it as easy as possible and as streamlined as possible for borrowers who are eligible for disability discharge to receive a disability discharge,” said Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.
The agency has taken some steps in that direction. In 2016, the Department cross-referenced its records with the Social Security Administration to identify nearly 400,000 borrowers who qualified for a disability discharge and sent them a letter and completed disability discharge application for the borrower to sign and return if they wanted their debt cancelled.
Some want disabled borrowers to have their debt automatically discharged
But advocates would like the government to go further by automatically cancelling the debt in cases where they know a borrower qualifies for a disability discharge. A bipartisan group of 51 attorneys general wrote to Secretary of Education Betsy DeVos last month asking that she automatically cancel the debt of veterans who the agency has identified as qualifying for a disability discharge.
Liz Hill, a Department of Education spokeswoman, wrote in an email that the agency couldn’t comment specifically on the case but that it’s “committed” to making the total and permanent disability discharge process as easy as possible for veterans. “We are reviewing our current processes and procedures to determine what, if any, changes we can implement,” she wrote.
Many of the plaintiffs’ stories illustrate another reason borrowers who qualify for a disability discharge may have trouble accessing it — the debt collectors that work with borrowers on behalf of the Department to recoup defaulted student debt aren’t incentivized to tell them about it.
The collectors are paid $1,710 to get borrowers current on their loans through a process called rehabilitation, but are only paid $150 to help a borrower with a disability discharge.
(Not all organizations that work with defaulted student loan borrowers have this incentive structure. Some of the plaintiffs who struggled to get information about a disability discharge, including Carrasquillo, worked with nonprofit organizations known as guarantee agencies).
“No one is telling anyone about a disability discharge,” Tyler said. “All of these people did various things on their own, did all this research to figure out what their rights were. It’s a system that was not working at all.”
The government garnished one veteran’s Social Security benefits for years even though he qualified for a discharge
Marshall Lee experienced the challenges posed by the system first-hand. Shortly after serving in the U.S. Army as a paratrooper in the late 1970s, the now 63-year-old took out about $2,000 in student loans to attend a New York City community college, ultimately dropped out without completing a degree and defaulted on his debt, according to court documents.
Lee has received disability benefits since 2000. He suffered from mental illness that made it impossible for him to work. His plane jumping days also resulted in a challenges with his hip, which ultimately needed to be replaced, and arthritis. Since at least 2014, he’s received a designation from the Social Security Administration that means his disability is severe enough that he automatically qualifies for a discharge of his student debt, according to court documents.
Nonetheless, beginning in 2015, Lee saw his Social Security checks dwindle to repay his debt. The organization collecting his debt, attempted to steer Lee towards a rehabilitation program — a way for borrowers to cure their default, but where they’re still obligated to pay the loan — even though Lee told them he was disabled and wanted to stop his disability benefits from being taken, according to court documents.
In the meantime, the loss of funds put a strain on his finances. Lee, who also coped with head injuries due to his time on the U.S. Army boxing team, fell behind on his utility bills. Ultimately, after years of getting his benefits garnished, Lee was able to have his debt discharged and thanks to the lawsuit, he’s getting back the roughly $700 he lost.
“That was a relief, that took a lot of stress off me,” he said. “I couldn’t have managed.”
Disabled borrowers now have better information on how to avoid garnishment
Tyler is hopeful that the suit will help the system work at least a little bit better, beyond just the plaintiffs listed in the suit. During the course of the litigation, the government agreed to change the notice it sends to borrowers before it garnishes their benefits to clearly state that borrowers with disabilities could prevent their benefits from being garnished if they applied for a total and permanent disability discharge.
The new notice also provides the website and phone number borrowers can use to do this. The previous notice didn’t make any mention of the disability discharge process.
There’s also a greater likelihood the borrowers will actually receive the notice. During the course of the lawsuit, the government also agreed to send the notice to the last address any agency has on file for the borrower, including the address where they may be receiving their Social Security benefits. In the past, the government would send the notice to the address a borrower’s latest tax filing, but because many of the borrowers who are subject to this offset are low-income and have no obligation to file taxes, that address was often useless.
About one-quarter of the plaintiffs in the suit never got warning their benefits were being garnished, because it was sent to an address they weren’t using, Tyler said.
“A lot of people don’t even realize that they’ve been nickled and dimed this way,” he said. “Hopefully this notice will make a difference.”
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