Education Department Will Erase $5.8 Billion In Loans For Borrowers With Disabilities

The U.S. Education Department announced Thursday that it is discharging the outstanding student loans of more than 323,000 borrowers who have significant, permanent disabilities, and will remove barriers for borrowers who qualify for this relief in the future. The announcement will erase some $5.8 billion in debt and marks a significant step toward fixing a troubled debt relief program meant to help borrowers with disabilities.

NPR's reporting over the past two years has shown that a fraction of eligible borrowers have been getting the relief they're entitled to under the federal Total and Permanent Disability Discharge program, which dates back to 1965. In fact, many borrowers didn't know they were eligible at all.

"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," U.S. Education Secretary Miguel Cardona.

The program is meant to wipe out the student loan debt of Americans who can no longer work due to a significant disability. But, until now, borrowers who qualified for the program had to apply for the relief.

Now, relief will become automatic for those who are identified through a data match with the Social Security Administration. The next match is in September, and based on those who were identified in June, the department expects more than 323,000 people to receive relief amounting to $5.8 billion.

The department also said it will propose eliminating a significant hurdle for those borrowers who have been approved for loan discharge: a three-year income monitoring period, during which many people have seen their loans reinstated through no fault of their own.

The department said it will permanently stop sending requests to these borrowers for income information during this period — a decision it made temporarily during the pandemic — and will pursue doing away with the monitoring period entirely during upcoming negotiated rule-making.

Borrowers and advocates see this move as a first step toward fixing the discharge program. "This is a huge deal for the hundreds of thousands of borrowers who are entitled to this relief and frankly, it's very long overdue," said Persis Yu, a staff attorney at the National Consumer Law Center.

But "we also hope that the department will look at the eligibility criteria that it uses to determine when someone has a disability discharge," Yu added. Some borrowers with disabilities who should be getting loan discharges aren't identified in the Social Security Administration's match, Yu said. [Copyright 2021 NPR]