Thursday’s announcement by the Biden administration was that student loans will be automatically erased for over 300,000 Americans living with severe disabilities who are unable to make a significant income.
According to the Education Department it will erase more than $5.8 trillion in debt. It also marks the beginning of a larger overhaul of a program that was previously criticized for being too burdensome.
Miguel Cardona, Education Secretary, stated that he had heard from advocates and borrowers with disabilities about the need to make changes and was excited to take action.
Federal student debt relief is available for those who are “totally or permanently disabled” and have low incomes. The current regulations require that they submit documentation about their disability and to undergo a three year monitoring period to show they are not earning much.
Tens of thousands of people were dropped from the program and their loans restored because they did not submit proof of earnings. Critics claim that the complicated rules discourage some applicants.
Advocates have asked the Education Department for an end to the monitoring period and for automatic debt relief for people that the Social Security Administration has already identified as permanently disabled.
Both of these demands will be fulfilled under the new initiative. The Education Department will begin erasing student loans for 323,000 Americans who are permanently disabled according to Social Security records.
Once relief has been granted, borrowers will be notified. All loans will be paid off by the end the year.
The department plans to end the program’s 3-year monitoring period. This was previously suspended due to the pandemic. The agency stated that this change will be enacted during the federal rulemaking process, which is scheduled to begin in October.
Cardona stated that the process would be smooth for borrowers during a conference call with reporters. They won’t have to apply for it or get bogged down with paperwork.
Advocates hailed the victory as a victory. Aaron Ament, President of the National Student Legal Defense Network called it a “life-changing step”.
He said, “This is a big moment for hundreds and thousands of borrowers who have disabilities who can now go on with their lives without being trapped in a debt cycle.”
Since 2016, the program has been under scrutiny by a federal watchdog agency. It was found that income reporting had created a problem for borrowers. The U.S. Government Accountability Office stated that 98% of the cases where loans were restored were due to borrowers failing to submit paperwork and not because their earnings were too low.
In 2019, the Trump administration began to grant automatic loan cancellations to eligible military vets, but this did not apply to hundreds upon thousands of Americans with disabilities.
In March, the Education Department canceled debt for more than 40,000 borrowers whose debt had been restored because of paperwork issues, but it indicated further changes would need to come through a federal rulemaking process.
Cardona made the announcement as the White House is under increasing pressure to forgive more debts.
Democrats including Senate Majority Leader Chuck Schumer, N.Y., and Sen. Elizabeth Warren, Mass., have called on Biden to erase $50,000 in student debt for all borrowers as a way to jumpstart the economy.
Biden has asked the Education and Justice departments to assess the legality of mass debt cancellation. Cardona stated Thursday that these conversations are ongoing. He also said that his agency is currently working to improve debt forgiveness programs that target particular groups of borrowers.
He said, “It’s an attempt to show that we are trying to improve targeted loans relief and help our borrowers.”