More than 323K disabled borrowers to receive automatic student loan forgiveness

The Biden administration on Thursday announced it would line up more than 323,000 borrowers with a total and permanent disability (TPD) for $5.8 billion in automatic federal student loan forgiveness.

The Education Department announced that it would no longer make those classified as totally and permanently disabled by the Social Security Administration (SSA) apply for their federal student loans to be discharged. Instead, borrowers with TPDs will be able to receive automatic forgiveness thanks to a new rule allowing student loan servicers to match customer data with the SSA.

“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,” Secretary of Education Miguel Cardona said in a statement.

Federal law allows student borrowers with TPDs to seek forgiveness of their federal student loans on the grounds that they would not be able to make enough to pay them off. Those with TPDs may receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), meaning the SSA would likely have the necessary information to determine if they qualify for student loan forgiveness.

The Education Department previously arranged a similar automatic loan forgiveness regime with the Department of Veteran Affairs, but the new Thursday rule will allow non-veterans with TPDs to avoid the application process.

“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.”

Cardona said the change will go into effect next month during the upcoming quarterly data match with the SSA. 

The department is also indefinitely suspending the process of sending automatic income information requests to those who receive TPD loan discharges. If a borrower with a TPD fails to respond to that request, the Education Department may order them to repay their loans.

The department will also propose scrapping the three-year income review following the grant of TPD loan discharge.

Cardona’s announcement is the latest step by the Biden administration toward wiping out student debt for the most vulnerable borrowers, including those defrauded by for-profit colleges and borrowers who qualified for public service loan forgiveness but did not receive it.

But Biden is also facing intense pressure from liberal lawmakers and activists to forgive up to $50,000 in federal student loans per borrower regardless of income level or economic status.

Supporters of broad-based student loan forgiveness insist Biden has the power and obligation to wipe out much of the $1.6 trillion in federally held debt owed by roughly 43 million borrowers. 

While progressives pushed ambitious student loan forgiveness before the pandemic as a means to narrow the racial wealth gap and inequality, they say the cause is even more urgent after the economic crisis.

Biden has explicitly ruled out forgiving up to $50,000 per borrower, but suggested he was open to a unilateral loan forgiveness order with a smaller total and income restrictions. The president is also waiting on a review of his legal authority from the Justice Department, the White House has said.