The Biden administration announced Thursday it will automatically erase student loan debt for more than 300,000 Americans with severe disabilities that leave them unable to earn significant incomes.
The move will wipe out more than $5.8bn in debt, according to the education department, and it marks the start of a broader overhaul of a program that has been criticized for having overly burdensome rules.
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“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,” the education secretary, Miguel Cardona, said in a statement.
The federal government offers student debt relief for people who are “totally and permanently disabled” and have limited incomes.
But the current rules require them to submit documentation of their disability and undergo a three-year monitoring period to prove they’re earning little pay.
Tens of thousands of people have been dropped from the program and had their loans reinstated simply because they failed to submit proof of their earnings, however, and critics say the complex rules deter some from applying.
Advocates have pressed the education department to eliminate the monitoring period entirely and to provide automatic debt relief to people who the Social Security Administration already identifies as permanently disabled.
Under the new action, both demands will be met. Starting in September, the education department will start erasing student debt for 323,000 Americans identified in social security records as being permanently disabled.
Borrowers will be notified once they have been approved for relief. All of the loans are expected to be discharged this year.
The department also plans to eliminate the program’s three-year monitoring period, which was previously suspended during the pandemic. That change is expected to be cemented during a federal rule-making process set to start in October, the agency said.
“This is going to be a smooth process for our borrowers,” Cardona said in a call with reporters. “They’re not going to have to be applying for it or getting bogged down by paperwork.”
Advocates celebrated the change. Aaron Ament, president of the National Student Legal Defense Network, called it a “life-changing” step.
“This is a huge moment for hundreds of thousands of borrowers with disabilities who can now move on with their lives and won’t be trapped in a cycle of debt,” he said.
The program has faced scrutiny since 2016, when a federal watchdog agency found that the income reporting process posed an obstacle for borrowers.
In 98% of cases in which loans were restored, it was because borrowers did not submit paperwork, not because their earnings were too high, the US Government Accountability Office reported.
The Trump administration started granting automatic loan cancellations to eligible military veterans in 2019, but the move did not apply to hundreds of thousands of other Americans with disabilities.
Democrats including the Senate majority leader, Chuck Schumer, and Senator Elizabeth Warren have called on Biden to erase $50,000 in student debt for all borrowers as a way to jumpstart the economy.