On Thursday, the Biden administration announced that it will automatically cancel student loan arrears for more than 300,000 Americans with severe disabilities that prevent them from earning significant income.
The move will result in over $ 5.8 billion in debt relief and marks the beginning of a broader program overhaul, which has been criticized for overly onerous rules, according to the Education Department.
“We have heard clearly and clearly from borrowers with disabilities and advocates about the need for this change, and we are very pleased to implement it,” Education Minister Miguel Cardona said in a statement.
The federal government is offering student debt relief for people who are “completely and permanently disabled” and have limited income. But current regulations require them to file their disability papers and go through a three-year follow-up period to prove they are earning little.
However, tens of thousands of people have been excluded from the program and their loans have been reinstated simply because they did not provide proof of their income, and critics say complex rules are deterring some from applying.
Lawyers have called on the Department of Education to completely abolish the monitoring period and provide automatic cancellation of debts to people who are already identified as disabled by the Social Security Directorate.
Both requirements will be met in accordance with the new promotion. Beginning in September, the Department of Education will begin erasing the student debt of 323,000 Americans who are listed as permanently disabled on Social Security records.
Borrowers will be notified as soon as they are approved for payment of compensation. All loans are expected to be repaid by the end of the year.
The department also plans to cancel the three-year monitoring period for the program, which was previously suspended during the pandemic. The change is expected to be consolidated during the federal rule-making process, which will begin in October, the agency said.
“It will be a smooth process for our borrowers,” Cardona said in a telephone conversation with reporters. “They don’t have to apply or get bogged down in paperwork.”
The defenders marked the change as a victory. Aaron Ament, president of the National Student Advocacy Network, called the move “life-changing.”
“This is an important moment for hundreds of thousands of borrowers with disabilities who can now move on and not be trapped in the debt cycle,” he said.
The program has been under scrutiny since 2016, when a federal supervisory agency found the income reporting process to be an obstacle for borrowers. The Accounts Chamber of the US government reported that in 98% of cases, loan recovery was due to the fact that borrowers did not submit documents, and not because of too high income.
The Trump administration began providing automatic loan cancellations to eligible military veterans in 2019, but the move did not extend to hundreds of thousands of other Americans with disabilities.
In March, the Ministry of Education wrote off the debts of more than 40,000 borrowers who were recovered due to paperwork problems, but indicated the need for further changes as part of the federal rule-making process.
Cardona announced the change as the White House faces mounting pressure to seek broader debt forgiveness.
Democrats, including Senate Majority Leader Chuck Schumer, New York, and Senator Elizabeth Warren, Massachusetts, have called on Biden to write off a $ 50,000 student debt for all borrowers to boost the economy.
Biden asked the education and justice departments to assess the legality of the massive debt write-offs. Cardona said on Thursday that these conversations are “still ongoing.” Meanwhile, he said, his agency is working to improve other debt relief programs targeting specific groups of borrowers.
“This is an attempt to show that we are working to improve targeted loan assistance and help our borrowers,” he said.