The Department of Education announced that borrowers with a total and permanent disability will receive automatic student loan forgiveness. Additionally, it also announced that over 47,000 service members will have their student loan interest retroactively waived. Here’s what you need to know about this week’s student loans news.
2 current trends within student loans for the week of Aug. 23, 2021
1. Over 323,000 federal student loan borrowers with a total and permanent disability will now receive automatic loan discharge
The Department of Education announced on Thursday that federal student loan borrowers with a total and permanent disability (TPD) will receive automatic student loan discharge. This is due to a new regulation that’s part of an ongoing effort by the Biden administration to reform and simplify existing federal student loan forgiveness programs.
TPD is a law that discharges federal student loans for borrowers that have a total and permanent disability. In order to qualify for TPD discharge, borrowers must be unable to work or make above an income cap due to their disability. The new regulation makes it easier for borrowers to receive the relief that they’re lawfully entitled to.
How this affects student loans
Before the new regulation, borrowers had to apply for discharge and were subject to a three-year income monitoring period. If their income rose above a certain threshold, their loans would become reinstated. This resulted in thousands of borrowers not getting the relief they would have otherwise received due to documentation issues.
Now, qualifying borrowers will be automatically enrolled through administrative data matching with the Social Security Administration (SSA). The first match is set to take place in September during the next SSA quarterly match. Borrowers have the option to opt-out if they wish, and the Department expects all who qualify will have their loans discharged by the end of the year.
The Department also suspended the income-monitoring documentation requirements as a form of COVID-19 relief in early 2021, and will now be suspending that requirement indefinitely. It will propose eliminating this requirement altogether during the upcoming negotiated rulemaking set to begin in October.
2. Over 47,000 qualifying service members will have federal student loan interest waived
The Department announced on Friday that over 47,000 service members will now have their federal student loan interest automatically waived.
Under the Higher Education Act, service members deployed to areas that qualify them for imminent danger or hostile fire pay are eligible for an interest waiver on specific federal student loans that were disbursed on or before Oct. 1, 2008.
However, before the announcement, service members were required to apply for the waiver and submit the required documentation. As a result, very few borrowers received the waiver due to complications with the documentation or application requirements; in 2019, only 4,800 borrowers received it.
How this affects student loans
Due to the new measure, service members no longer have to apply or submit documentation. Those that qualify will be automatically identified through administrative data matching with the U.S. Department of Defense. Both former and current active-duty service members are eligible for the waiver.
This relief measure was implemented with the aim of making the waiver widely accessible and easier to obtain, with an estimated 880 percent more service members benefiting now than in 2019.
Here’s how you can get prepared
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.
- Federal student loan forgiveness update: See where the latest policies and proposals stand
- More than 47,000 service members have federal student loan interest automatically waived
- U.S. Department of Education issues over $5.8 billion in student loan forgiveness for borrowers with total and permanent disabilities