The Department of Education (Department) has announced that individuals who have a total and permanent disability (TPD) will have their unpaid student loans automatically discharged without having to file any paperwork. The change will affect 323,000 borrowers and result in a discharge of more than $5.8 billion in unpaid loan balances.
Pursuant to regulations enacted under the Higher Education Act, individuals with a total and permanent disability are entitled to a discharge; however, under the prior rule borrowers were required to submit an application to qualify for the relief, and only half of the eligible borrowers had received a discharge.
Under the new rule, the Department will automatically match the Social Security numbers of borrowers with unpaid student loan balances against a database maintained by the Social Security Administration of individuals who are identified as having a total and permanent disability. The loans for those cross-referenced individuals will then be eliminated. The process will begin in September.
“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,” said U.S. Secretary of Education Miguel Cardona in a statement. “From day one, I’ve stressed that the Department of Education is a service agency. 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.”
The Department is also proposing to end a three-year income monitoring period to determine whether individuals who have been designated as TPD are making enough money to repay their student loans. The monitoring program has been suspended during the COVID-19 pandemic, but the Department is proposing to eliminate it entirely.
With this latest action, the Biden-Harris administration now has approved approximately $8.7 billion in student loan discharges for roughly 455,000 borrowers. In addition, the Department has extended the pause on student loan repayment, interest, and collections to January 31, 2022.