The young woman took out $40,000 in student loans, attended nine postsecondary schools and then was declared disabled--permanently and totally. Less than a week after her college debt was forgiven because of the disability, she miraculously recovered, enrolled in a university and got a new student loan for $10,500.

Another student borrower, also medically certified as forever disabled, was released from repaying $42,000 in loans because of her disability. Within months, the former student had gone to work, earning $75,000 in little more than a year.

Both student borrowers escaped their loan obligations through a new route the Education Department inadvertently opened in 1995 by changing one of its lending rules. Under the new rule, a disabled student whose debt had been forgiven did not have to commit to repaying old loans before receiving new ones.

Still others, according to an Education Department audit, were able to wipe out their loans and bilk the program by falsely claiming they were dead, as did one man who substituted his name and Social Security number on a twin brother's death certificate.

Together, false claims of death or permanent disability resulted in nearly $80 million in government-guaranteed loans being forgiven over the course of 2 1/2 years ending in late 1996, the department's inspector general reported earlier this month. When investigators spot-checked Social Security Administration records of individual earnings, they discovered that nearly a quarter of supposedly completely disabled borrowers in the national sample were working. So were 2 percent of those who had died.

"They didn't have to prove they were dead," said Rep. John L. Mica (R-Fla.), who described himself as "raising Cain" about the department's lax procedures. Sen. Fred Thompson (R-Tenn.), chairman of the Senate Governmental Affairs Committee, said he was disturbed about such "bilking of the student loan program."

In response to the audit and criticism from Congress, the Education Department has adopted nearly all of the audit's recommendations, taken steps to reinstate the forgiven loans and urged the inspector general's office to pursue criminal charges.

"We're going to be very aggressive about reviewing these cases and getting back what is owed," said Greg Woods, director of the Office of Student Financial Assistance.

The bulk of the unpaid loans, amounting to $73 million, were forgiven because of false disability claims. The living dead owed about $4 million.

The department is to begin requiring the submission of original or certified copies of death certificates before student loans are forgiven. Previously, photocopies were acceptable, including some that were typed except for a handwritten name.

To make them easier to verify, disability claim forms will be revised to include the phone number and professional license information of the doctor said to have examined the student borrower. Woods said the Education Department also would study how the Social Security Administration, the Veterans Affairs Department and private insurers evaluate the disability claims they receive. Additional computer checks on the earnings of borrowers later declared disabled are planned, using credit reports.

But the department has rejected as too cumbersome the audit's recommendation that it contract with the Social Security Administration to determine whether borrowers have truly become so disabled that they are unable to work or attend school.

The inspector general's audit, which Woods requested after noticing a rise in disability claims, did not cover student loans made directly by the government, because the first ones were made just five years ago and few have come due for repayment.

It was a 1995 change in rules for guaranteed student loans--so the older program would conform to regulations for the new, direct loans--that created an unexpected problem when those with disabilities were allowed to avoid paying their previous loans. Within two years, new loans of that description more than tripled.