More than 323,000 student loan borrowers with a total and permanent disability will have their debt automatically discharged, resulting in more than $5.8 billion of relief, the Department of Education announced Thursday.
The announcement comes after years of pressure that spanned multiple administrations to make it easier for borrowers with a total and permanent disability to access the loan forgiveness they’re entitled to under the law.
Though borrowers who have a disability that makes it impossible for them to work have the right to have their loans cancelled, they typically have to go through an application process that includes providing proof of their disability that can be challenging to navigate.
In some cases, borrowers with a disability who had their Security Disability benefits garnished over defaulted student loans weren’t made aware of their right to have their loans discharged by the government.
‘This process is going to be a smooth process for our borrowers, they’re not going to have to be applying for it and getting bogged down with paperwork.’
— Secretary of Education Miguel Cardona
“This process is going to be a smooth process for our borrowers, they’re not going to have to be applying for it and getting bogged down with paperwork,” Secretary of Education Miguel Cardona, said of the $5.8 billion in relief on a conference call with reporters. “This is in alignment with our strategy from day one to put our borrowers at the center of the conversation.”
Instead of asking borrowers to raise their hand for a total and permanent disability discharge, the Department of Education will do a data match with the Social Security Administration — which through its work administering disability benefits has the information that would indicate whether a borrower has a total and permanent disability — to identify borrowers eligible for a discharge.
The borrowers identified by the match, which will take place in September, will receive information about the discharge a few weeks after the match and should have their debt discharged by the end of the year, the Department said. Borrowers can opt out of the discharge. They won’t face federal income taxes on the debt relief, though there may be some state tax consequences.
For years, advocates have urged the Department to use the Social Security match to automatically cancel the debt of those eligible for a total and permanent disability discharge.
The agencies do the data match once per quarter and new, eligible borrowers who are identified each time will have their debt discharged going forward, according to the agency.
For years, advocates have urged the Department to use the Social Security match to automatically cancel the debt of those eligible for a total and permanent disability discharge. Most recently, a bipartisan group of lawmakers wrote to the Department urging them to take this step.
In 2016, the Obama administration began using the match to notify eligible borrowers about the debt relief, but they stopped short of automatically cancelling their loans. In 2019, the Trump administration used a data match with the Department of Veterans Affairs to automatically cancel the debt of veterans with a total and permanent disability.
As part of Thursday’s announcement, Department officials also said they plan to propose eliminating a three-year income monitoring requirement that borrowers who recieve a total and permanent disability discharge through any process other than the VA are typically subject to. Already, the agency said it plans to extend indefinitely a policy announced in March to stop asking these borrowers to provide information about their earnings.
When borrowers don’t respond to these requests, their loans can be reinstated. A 2016 Government Accountability Office report found that 98% of disabled borrowers who had their debts reinstated didn’t have incomes that were too high to qualify, instead it was because the borrowers didn’t submit the documentation.
Pressure to address challenges
Thursday’s announcement comes as the Biden administration is facing pressure to address challenges plaguing the student loan system on many fronts. Advocates have called on the administration to fix issues plaguing other programs where borrowers are entitled to relief, but struggle to access it — including an initiative for public servants and a debt cancellation for borrowers who have been scammed by their schools — before the pause on student-loan payments and collections lifts at the end of January.
“We are working aggressively to improve our Public Service Loan Forgiveness and our Borrower Defense,” Cardona said on the call with reporters. “We’re going to be constantly looking for ways to support our borrowers, we’ve heard from them, we’ve heard that when they’re eligible for discharge we shouldn’t be providing obstacles for them to receive it.”
The agency has already cancelled more than $1.5 billion in loans held by scammed students, but advocates and lawmakers are urging them to do more so-called targeted debt relief as well as pursue some kind of mass debt cancellation. The White House has said it’s looking at the president’s legal authority to cancel student debt.
“That process is still underway,” Cardona said on the call. “We’re having conversations with the White House and the Department of Justice.”