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Biden to automatically cancel $5.8 billion in student loans for over 300,000 disabled borrowers

The Biden administration announced on Thursday, August 19, 2021 that it will be automatically wiping out the federal student loan debt for 323,000 borrowers.

The administration will be cancelling borrowers’ federal student loan debt through the Total and Permanent Disability (TPD) discharge program. The TPD Discharge program allows student loan borrowers who are unable to maintain substantial, gainful employment due to a physical or psychological medical impairment to get their federal student loans cancelled. However, to get student loans forgiven under the program, disabled student loan borrowers must submit a formal application, which can be challenging for those facing serious health issues, and many borrowers may not even realize that they qualify.

Advocates have long argued that the Department of Education has the ability and the authority to automatically grant TPD Discharges to disabled student loan borrowers who are receiving disability benefits through Social Security (provided that they have a disability review period of at least five to seven years). The Social Security Administration had previously identified hundreds of thousands of disabled student loan borrowers who would qualify for TPD discharges, and the agency has shared that information with the Department of Education, but the Department had not acted.

On Thursday, that finally changed, and the Department of Education will move forward in automatically discharging approximately $5.8 billion in federal student loans for disabled borrowers identified by the Social Security Administration as eligible. Secretary of Education Miguel Cardona characterized the action as "in alignment with our strategies from day one to put our borrowers at the center of the conversation... Today's action removes a major barrier that prevented far too many borrowers with disabilities from receiving the total and permanent disability discharges they are entitled to under the law,” he said.

The move follows additional efforts by the Biden administration to expand federal student loan forgiveness under existing programs, including recently cancelling $500 million in federal student loans through the Borrower Defense to Repayment program. These efforts are consistent with the Biden administration’s stated goal of providing “targeted” student loan forgiveness.

The Department of Education also indicated that it would be extending additional TPD Discharge relief that relaxes paperwork requirements during a three-year post-discharge monitoring period, during which borrowers have to report their employment status and associated earnings to the Department or risk a reversal of their student loan discharge. President Biden had suspended the monitoring requirements in response to the Covid-19 pandemic. The Department announced today that it “will indefinitely stop sending automatic requests for earnings information even after the national emergency ends.”

Advocates praised the administration’s moves. “This is a life-altering announcement for hundreds of thousands of student loan borrowers with disabilities,” said Student Defense Vice President and Chief Counsel Dan Zibel in a statement. “We have long been calling on the Department to take this step and eliminate unnecessary red tape that has kept too many people caught in a cycle of debt.  Today’s step is another indication that the Department is listening to the voices of student loan borrowers.”

“We are excited to see the Department of Education finally provide automatic discharges to the hundreds of thousands of disabled borrowers who have been entitled to this relief for years,” said Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, in a statement. “This action is long overdue and will make a huge difference in the lives of hundreds of thousands of borrowers who have been trapped in unnecessary student debt.”

The Department’s action today coincides with the beginning of a regulatory rewrite process to overhaul key federal student loan forgiveness and repayment programs, including the TPD Discharge program. The overhaul could result in significant changes to these programs, although final regulations could be years away. “We are also encouraged to see that the Department of Education plans to pursue broader changes through its upcoming rulemaking and we look forward to working with the Department through this rulemaking to eliminate the many barriers that exist which keep borrowers with disabilities from receiving the relief they are entitled to under law,” said Yu.

The Department stated that it will begin implementing the automatic student loan discharges in September.

 

This article was written by Adam S. Minsky from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.

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