2019 RDRC Meeting: Does Student Loan Forgiveness Drive Disability Application

Published: 2019


Student loan debt in the U.S. exceeds $1.3 trillion, and unlike credit card and medical debt, cannot typically be discharged through bankruptcy. Moreover, this debt has been increasing: The share of borrowers leaving school with more than $50,000 of federal student debt increased from 2% in 1992 to 17% in 2014. However, federal student loan debt discharge is available for disabled individuals through the Department of Education’s Total and Permanent Disability Discharge (TPDD) mechanism through certification of a total and permanent disability. In July 2013, the TPDD expanded to include receipt of Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) as an eligible category for discharge, provided medical recovery was not expected. Drawing on county-level differences in student-loan indebtedness, this study finds SSDI and SSI application rates increased in counties with a greater incidence of student-loan indebtedness after this 2013 change relative to less student-loan-indebted counties. Our estimates imply that counties with the mean incidence of student-loan indebtedness versus those with no indebtedness had approximately a 10% higher rate of SSDI and SSI application after this policy change, with 40% of these applications being successful. Given that the geographic distributions of student loan indebtedness and historical SSDI/SSI program participation differ, there are strong implications for both the size and location of SSDI and SSI beneficiaries. Furthermore, these findings highlight the importance of policy changes in programs that interact with SSDI and SSI in understanding the drivers of disability program participation.

Key Findings