Top student loans trends for the week of April 5, 2021: Department of Education forgives millions of dollars for borrowers with disabilities

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In the ever-changing world of student loans, staying on top of current events and student loan rates is critical. Below are this week’s student loan trends that could affect your loans — and your wallet.

3 current trends within student loans for the week of April 5, 2021

1. Department of Education forgives student loan debt for borrowers with total and permanent disabilities

On March 29, the U.S. Department of Education announced reforms to the total and permanent disability (TPD) discharge program, a move expected to forgive over $1.3 million in student loan debt and impact 230,000 qualifying borrowers.

The TPD discharge program allows totally and permanently disabled borrowers who meet the eligibility criteria to have their federal student loan debt discharged. Prior to last week’s announcement, borrowers were required to submit three years’ worth of required documentation proving that they met the income requirements to qualify for the program. If they rose above the income threshold or failed to provide documentation, their loan debt would be reinstated.

A recent report by the U.S. Government Accountability Office found that 98 percent of applicants had their debt reinstated not because they didn’t meet the income requirements, but because they failed to submit the proper documentation. Because of this, the Biden administration has decided to repeal documentation requirements for the remainder of the COVID-19 pandemic.

How this affects student loans

With the coronavirus-related reforms, student loan borrowers with disabilities will now be able to more easily qualify for TPD discharge. Those who meet the eligibility criteria will not be required to submit the income documentation throughout the remainder of the pandemic, and borrowers who had their loans reinstated will receive a refund and get their discharges back for any payments made after March 13, 2020.

If you are already eligible or currently enrolled in the program, your loan servicer should be contacting you with further details in the upcoming weeks.

2. Borrowers with defaulted FFEL loans will now receive student loan relief

Last Tuesday, the Biden administration extended COVID-19 relief to borrowers who have defaulted on FFEL loans. Eligible borrowers will no longer be subject to interest charges, and collections activities will pause. This is expected to impact over 1 million student loan borrowers and protect 800,000 people from having their federal tax refunds seized due to defaulted payments.

These relief measures previously only applied to borrowers with federally held student loans.

How this affects student loans

Borrowers with defaulted FFEL loans will not only have their federal tax refunds protected, but they will also see relief retroactively applied to March 13, 2020 — meaning borrowers who went into default after that date will likely see negative marks removed from their credit reports. Borrowers who made payments on these loans during that time will be refunded.

The wrinkle? Only borrowers with defaulted loans can benefit from this announcement. Borrowers with FFEL loans that are in good standing are still not eligible for federal student loan relief and are responsible for paying interest charges on their student loans.

3. President Biden explores student loan cancellation

Last week, President Biden asked U.S. Secretary of Education Miguel Cardona to oversee a legal review as to whether or not the cancellation of student loan debt without congressional approval is constitutional.

Biden has long favored canceling $10,000 in student loan debt for federal borrowers. Progressive Democrats have been nudging Biden to forgive a larger $50,000 in student loan debt per borrower, but Biden has questioned his authority to do so.

How this affects student loans

This legal review is expected to take a few weeks. If Biden’s team finds that he has the authority to cancel a portion of student debt — likely $10,000 per borrower, as he originally proposed — the president may begin taking next steps in student loan forgiveness. It appears that his administration has been laying the groundwork in recent weeks, particularly with the decision to make all student loan forgiveness tax-free through 2025.

Next steps

Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.

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