The Department of Education announced on August 19 that it would automatically pay off federal student loans for 323,000 borrowers who qualify as totally and permanently disabled. Their debt stands at $ 5.8 billion.
Those who qualify for the loan discharge were identified through a data match with the Social Security Administration. Previously, people with federal student loans had to apply for a loan discharge by sending their disability documentation to the US Department of Veterans Affairs, SSA, or a doctor.
“Today’s action removes a major hurdle that was preventing far too many disabled borrowers from receiving the full and permanent disability releases to which they are entitled under the law,” said Miguel Cardona, secretary of Education, in a press release. “This change cuts down on paperwork in an effort to simplify processes as much as possible for borrowers who need help.”
Future borrowers will also not have to apply for a disability waiver; instead, they will be automatically identified based on information from the SSA or VA. Discharges, current and future, will not be subject to any federal income tax, but may be subject to certain state income taxes.
The Education Ministry will also no longer require people who have been granted disability leave to provide information about their income after receiving their leave. In March 2021, the ministry reinstated loan releases for 41,000 borrowers who had been approved for disability release, but whose loans were reinstated after failing to provide income information.
Loan cancellation for other borrowers
Cardona, when asked about a wider remission of student loans during a media call, said “the process is still ongoing” as the Education Department continues discussions with the Justice Department and the White House.
Earlier this year, President Joe Biden asked Cardona and the Education Department to explore whether he could pay off student loan debt by executive order. Some Democrats pushed Biden to write off up to $ 50,000 in debt per borrower, but the president said he was willing to only offload up to $ 10,000 per borrower.
Although the White House is still waiting for Cardona, House Speaker Nancy Pelosi has suggested that Biden does not have the power to write off student debt by executive order.
“He can postpone. He can delay. But he doesn’t have that power, ”Pelosi said at a press conference at the end of July. “It must be an act of Congress.”
Much has been said about canceling student loans for all borrowers, but neither the Biden administration nor Congress have made any concrete plans for a blanket cancellation.
Nonetheless, the Department of Education has relieved other borrowers through defending borrowers against repayment – a remedy for borrowers defrauded by their schools – since the start of the new administration:
- In March, the ministry announced it would provide full relief to borrowers approved for borrower defense debt cancellation, which totaled $ 1 billion in loan debt for 72,000 borrowers. The previous administration had approved these borrowers for partial relief.
- In June, the ministry forgave 18,000 borrowers who attended the ITT Technical Institute, a for-profit chain of schools that closed in 2016, in relief totaling $ 500 million.
- In July, the ministry unloaded $ 55.6 million for 1,800 new borrower defense claims.
- In August, the ministry announced that it was retroactively waiving interest on student loans for 47,000 current and former active duty members. Future military personnel will also automatically benefit from this interest benefit on student loans.
Your Options When Federal Student Loan Payments Resume
For the vast majority of borrowers whose federal student loans have not been canceled, payments resume at the end of the forbearance period on February 1.
For those who have financial difficulties, the period before the end of the abstention can be used as a trial period. Set aside your monthly student loan bill to get into the habit of paying, but also to see if you are able to pay your entire loan bill.
If you’re having trouble reversing these payments, or if you already know you’ll have trouble making payments on February 1, contact your provider before resuming payments to find a refund option that’s right for you. Then, once your payments have resumed, you will go straight to that repayment plan. The income-based repayment reduces payments to a percentage of your disposable income, even as low as $ 0.
Borrowers who are confident they will be able to resume their payments on February 1 should consider making payments during the final forbearance extension. This will help pay off loans faster and lower the total interest paid on loans.
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Colin Beresford writes for NerdWallet. Email: [email protected]
The article United States Pays off Student Debt Due to Disability; Large delays of $ 10,000 originally appeared on NerdWallet.
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