$5.8 billion worth student loan debt to be canceled for people with severe disabilities

The Biden administration announced Thursday that it will erase $5.8 billion in federal student loan debt for borrowers with total and permanent disabilities. The move marks a significant step toward fixing an inefficient debt relief program meant to help disabled borrowers. According to NPR, so far, only a fraction of eligible borrowers have been getting the relief they're entitled to under the federal Total and Permanent Disability Discharge program. Many weren't even aware that they were eligible for it. "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. Secretary of Education Miguel Cardona said in a statement.

The program—which dates back to 1965—is meant to wipe out the student loan debt of borrowers who are unable to maintain substantial, gainful employment due to a physical or psychological medical impairment. However, until now, Americans who qualified for the TPD Discharge program had to submit a formal application to access the relief. The Biden administration has now made it possible for those eligible to be automatically identified through a data match with the Social Security Administration. "From day one, I've stressed that the Department of Education is a service agency," Cardona said in his statement.

"We serve students, educators, and families across the country to ensure that educational opportunity is available to all. We've heard loud and clear from borrowers with disabilities and advocates about the need for this change and we are excited to follow through on it. This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support," he added. The U.S. Department of Education "removed [the] application barrier in 2019 for borrowers identified as eligible for a TPD discharge through the match with the U.S. Department of Veterans Affairs (VA)," said the press release.

"However, it had not yet done so for those identified through the data match with SSA. As a result, only about half of borrowers identified as eligible for TPD through the SSA match have received the discharge, causing thousands to stay in repayment or possibly even default," it added. "This change will go into effect with the Department's next quarterly data match with SSA, which will occur in September. Borrowers will receive notices of their approval for a discharge in the weeks after the match and the Department expects that all discharges will occur by the end of the year."

Over 323,000 people are expected to receive relief amounting to $5.8 billion following this change. The department also announced that it will propose eliminating another major hurdle faced by those who have been approved for loan discharge: a three-year income monitoring period, during which "the borrower may lose their discharge if their earnings are above a certain threshold or they do not respond to a request for earnings information." Additionally, the department said it will "indefinitely stop sending automatic requests for earnings information" during this period — a temporary decision originally made during the pandemic.

"With this TPD action, the Biden-Harris Administration has now approved approximately $8.7 billion in student loan discharges for roughly 455,000 borrowers," the press release stated. "In late March, the Department restored $1.3 billion in loan discharges for 41,000 borrowers who had seen their loans reinstated after not responding to requests for earnings information.  Since March 2021, the Department has also approved more than $1.5 billion in discharges through the borrower defense to repayment process for nearly 92,000 borrowers whose institutions took advantage of them. In addition, the Department has extended the pause on student loan repayment, interest, and collections, to January 31, 2022, which helps 41 million borrowers save billions of dollars a month."