NB19-18: Does Student Loan Forgiveness Drive Disability Application?: The Effect of the 2013 Expansion of the Total and Permanent Disability Discharge Program on DI and SSI Participation

Student loan debt in the US exceeds $1.3 trillion, and unlike credit card and medical debt, cannot typically be discharged through bankruptcy. However, people with disabilities can apply to discharge their federal student debt through the Department of Education’s Total and Permanent Disability Discharge (TPDD) mechanism, and in July 2013, the TPDD expanded to include receipt of Social Security Disability Insurance or Supplemental Security Income as an eligible criterion for discharge. Student debt burdens have markedly increased in the past few decades, with the share of borrowers leaving school with more than $50,000 of federal student debt increasing from 2 percent in 1992 to 17 percent in 2014 (Looney and Yannelis 2015). The ability to discharge this debt through acceptance into DI or SSI therefore represents a substantial incentive to apply for these programs. Those considering discharging their student debt through DI or SSI application must at least temporarily exit from the labor force, and their earnings may be permanently depressed even if rejected (Autor et al. 2017). The changing age and education level of borrowers, coupled with an increase in student debt loads and the reduction in the difficulty of obtaining TPDD, suggests that both the applicant and recipient pools for DI and SSI may undergo important compositional changes.
We propose to study the extent to which this student loan policy change increased applications to DI or SSI as a function of student loan indebtedness, as well as the mediating influence of personal characteristics such as age and educational attainment. Because discharge under the 2013 TPDD change additionally requires a determination of a disability lasting at least five years, we will further estimate whether award rates increased as much as application rates, and whether any such increases were driven by awards for disabilities determined to last at least five years.