On March 29, the Biden administration announced that it would be forgiving more than $1.3 billion in student loan debt for borrowers with total and permanent disabilities. This move will impact over 230,000 borrowers and will allow them the chance to focus their financial resources elsewhere, as many have been hit hard by the COVID-19 pandemic.
What is total and permanent disability discharge?
This move from the Biden administration addresses what’s known as total and permanent disability (TPD) discharge. Through this program, student loan borrowers who become totally and permanently disabled may have the remainder of their federal student loan balances forgiven.
Prior to the Department of Education’s Monday announcement, borrowers were required to submit three years’ worth of requested documentation in order to prove that they met the income requirements for total and permanent disability discharge. If a borrower’s income exceeded the poverty guideline amount for a family of two in their state, or if they failed to submit documentation as requested, the previously discharged loans would be reinstated.
A report by the Government Accountability Office found that 98 percent of disability applications were reinstated not because of income increases, but because of documentation issues. Because of this, the Department o f Education has decided to waive documentation requirements for the duration of the COVID-19 crisis.
Totally and permanently disabled borrowers can more easily qualify
With these most recent reforms to TPD discharge, borrowers who qualify will not be required to submit income earning documentation for the duration of the COVID-19 emergency. Additionally, borrowers who had their loans reinstated will get their discharges back and receive refunds for any payments made after March 13, 2020.
“Waiving these requirements will ensure no borrower who is totally and permanently disabled risks having to repay their loans simply because they could not submit paperwork,” said Education Secretary Miguel Cardona in a recent press release. “Borrowers with total and permanent disabilities should focus on their well-being, not put their health on the line to submit earnings information during the COVID-19 emergency.”
If you are part of an affected group, you should receive communication from your servicer in the coming weeks.
Biden administration to take a ‘closer look’ at broader student loan forgiveness
The Biden administration appears to be targeting specific groups for student loan forgiveness — last week, it canceled the loans of borrowers who had been subject to colleges’ deceptive practices — but it has yet to make an announcement about mass loan cancellation.
“We’re still taking a look at our student loan options,” said White House press secretary Jen Psaki in a Tuesday press briefing. “This includes examining the authorities we have, the existing loan forgiveness programs that are clearly not working as well as they should. This includes borrower defense, total and permanent disability charges.”
Biden has long entertained the idea of canceling $10,000 per federal student loan borrower, and Psaki indicated that such a proposal is still on the table. “The president continues to call on Congress to cancel $10,000 in debt for student loan borrowers,” she said. “That’s something that Congress could take action on, and he’d be happy to sign.” In the meantime, a provision was added to the latest stimulus bill that makes student loan forgiveness tax-free through 2025.