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Biden Administration Eases Student Loan Forgiveness For Disabled Borrowers

disabled college students showing thumbs up.Today, the U.S. Department of Education announced efforts to improve the loan forgiveness process for student borrowers who have a total or permanent disability.

Under existing federal law, students who become totally and permanently disabled are eligible for a total and permanent disability (TPD) discharge, which forgives their federal student debt. But for disabled borrowers, applying for forgiveness can be a cumbersome process, especially for those facing other health challenges. 

The Biden Administration seeks to relieve some of the burden and make the application process smoother. The Department of Education announced that it will pause all paperwork requirements that borrowers are faced with in order to prove that they continue to have a low-income for the three years following their loan cancellation. The Department said these actions will help more than 230,000 disabled borrowers total. Part of this effort is retroactively reinstating more than 41,000 disabled borrowers who didn’t submit paperwork. Many organizations have pushed for this, including Veterans Education Success, the American Federation of Teachers, and more.

In August of 2019, the Trump Administration announced that it would discharge or forgive the federal student debt for veterans with a total or permanent disability. This move was said to impact approximately 25,000 disabled veterans. However, it did not do this for other borrowers.

While this is an improvement of the process, some have said it isn’t enough. 

The National Student Legal Defense Network (Student Defense) issued a statement blasting the administration. It said, “Let’s be clear: today’s announcement is not a victory for students. There are roughly 400,000 borrowers with disability who the Social Security Administration has already determined are legally owed debt relief.” Student Defense went on to call for the Biden Administration to automatically discharge the debt for these borrowers.

Advocates have called for this for years. However, there were legitimate concerns that the forgiveness would be treated as taxable income.

Bipartisan legislation to address this flaw by exempting the canceled loans from federal income taxes was eventually included as a small part of the GOP tax reform bill. With this fix, those same bipartisan legislators called on the Departmentin 2018 to discharge the student debt of disabled Americans, including veterans. However, the Department did not act. Today’s announcement is the first step to making sure disabled student borrowers receive the relief they are entitled to under federal law.

Source: https://www.forbes.com/sites/wesleywhistle/2021/03/29/biden-administration-eases-student-loan-forgiveness-for-disabled-borrowers

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