The U.S. Department of Education announced Thursday that federal student loan borrowers who have a total and permanent disability will receive an automatic student loan discharge following new regulations for the total and permanent disability discharge (TPD).
This relief measure will impact more than 323,000 eligible federal borrowers, with relief totaling more than $5.8 billion, and make the discharge process more accessible to borrowers in the future.
New regulations make it easier to free up student loans
The new regulations are part of an ongoing effort by the Biden administration to simplify the eligibility process for TPD discharge, a federal law that releases federal student loan debt from severely disabled borrowers who can no longer work.
Before the new rules, borrowers had to apply for relief and were subject to a three-year income-testing period after receiving their discharge – and if their income exceeded a certain threshold, they would have their debt reinstated. This resulted in the disqualification of thousands of borrowers due to documentation errors, not lack of eligibility.
In early 2021, the department suspended income verification requirements as a form of relief from coronavirus hardship. From now on, the TPD waiver will be automatically applied, and the department will permanently stop sending monitoring requests. In October, the ministry will work to eliminate the supervision period altogether.
Eligible borrowers will be automatically enrolled
In 2019, the Department of Education waived application requirements for borrowers with disabilities through correspondence with the US Department of Veterans Affairs (VA). However, this settlement was not widely available to the public and as a result only about half of eligible borrowers received relief.
Going forward, borrowers deemed totally and permanently disabled will now be automatically identified through matching administrative data with the Social Security Administration (SSA). The first game is currently set to take place in September during the next quarterly SSA data game.
Borrowers affected by the first match will be notified by the Ministry of Education in the following weeks and given the opportunity to withdraw if they wish. It is expected that all who qualify will have their loans repaid by the end of the year.