Automatic forgiveness of student loans for nearly half a million | pennyhoarder

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Automatic student debt relief is on the way for nearly half a million borrowers due to recent changes to the rules of the US Department of Education.

In a flurry of loan relief announcements, the Education Department described several groups of student loan borrowers who will receive automatic assistance unless they choose to opt out.

The groups include current and former military personnel, borrowers with qualifying permanent disabilities that prevent them from working, and participants in the now defunct ITT Tech who inadvertently took out “deceptive” loans that the for-profit college chain allegedly allegedly took. disguised as grants.

In total, approximately 485,000 borrowers are eligible for automatic relief.

The Department of Education identified these borrowers through data matching agreements with several other federal agencies, including the Social Security Administration, the Department of Veterans Affairs, and the Department of Defense.

All borrowers identified by the Department of Education are eligible for long standing student loan relief programs through the agency. Many borrowers were unaware of the programs or were unable to apply. Through data matching partnerships, the Department of Education is able to confirm borrower eligibility without the need for them to do so.

Pro tip

If you qualify for automatic student debt relief, the Department of Education will let you know this fall. You will have the option to unsubscribe if you prefer.

This latest wave of aid brings the Department of Education’s total student loan forgiveness to $ 9.5 billion in 2021. Those not included in this round of forgiveness may still benefit from the break on payments. federal student loans, which has been extended until January 31, 2021.

Here’s a closer look at who gets automatic help.

323,000 borrowers with an eligible disability

For federal student loan borrowers who have qualifying total and permanent disability, the Education Department is providing $ 5.8 billion in automatic loan forgiveness, according to an agency announcement.

Automatic discharge qualifications include:

  • Participation in a federal student loan program (i.e., Federal William D. Ford Direct Loans Program, Federal Family Education Loans Program, Federal Perkins Loan Program, and / or TEACH Grant service).
  • Total and permanent disability that prevents you from working, as determined by the Social Security Administration or the Department of Veteran Affairs.

The department said it would complete its next quarterly data match process in September and notify those eligible “within weeks of the match.” The agency plans to pay off the loans by the end of the year.

Going forward, the department told The Penny Hoarder that federal student loan borrowers who are determined to be totally and permanently disabled by the VA or SSA will be identified for automatic discharge on a quarterly basis.

Many other disabled federal student loan borrowers are eligible for a TPD waiver, but will need to apply manually – a process that staff attorney Alpha Taylor at the National Consumer Law Center called “too cumbersome.”

“For now, things will remain the same for borrowers who are not eligible for a TPD discharge based on the data matching program with SSA and VA,” Taylor told The Penny Hoarder. “They will still have to complete the cumbersome PDT application process and submit a physician certification to have their loans canceled.”

155,000 borrowers defrauded by ITT Technical Institute

Before the ITT technical institute closed in 2016, the for-profit school tricked some students into unnecessary debt.

“The institution has engaged in numerous false statements about the real state of its financial health and misled students by making them take out unaffordable private loans which would have been presented as grants,” the ministry said. education.

About 155,000 ITT alumni are now eligible for debt relief after further examination of ITT Tech’s deceptive activities. The Education Department has determined that students who attended ITT but did not complete their degree by March 31, 2008 are now eligible for a loan discharge.

To benefit from the automatic discharge:

  • You attended ITT Tech on or after March 31, 2008; and
  • You have taken out eligible student loans to pay for your studies; and
  • You did it not complete your diploma or certificate program.

The education department will complete its data matching process this month and notify eligible borrowers in the following weeks.

ITT Tech is one of more than 50 missing schools included in the Department of Education’s Closed School Release Program. Other schools include Chef’s Academy, Concordia University, Corinthian Colleges, Everest University and dozens more.

This discharge program typically offers an automatic loan discount to eligible borrowers three years after a school closes. However, if you think you qualify and don’t want to wait three years, you can manually apply to the program for faster release.

47,000 current and former soldiers

Due to a data matching agreement – this time with the Department of Defense – the Department of Education retroactively waives interest on student loans for at least 47,000 current and former active duty members.

This advantage should not be confused with the release of the loan, that is to say the forgiveness. It only affects the interest on the loan (s).

According to the ministry, military personnel eligible for this benefit have been or are deployed to “areas that qualify them for imminent danger or hostile fire compensation”, and must have taken out a federal student loan as of October 1, 2008.

Only a small percentage of eligible service members accessed the benefit. In 2019, before the data matching deal, the ministry said it was only waiving interest on 4,800 military personnel.

“Now the department is able to identify federal student loan borrowers who are serving on active duty by matching records to DOD personnel records,” the Department of Education said in a press release. “As a result, the Department can automatically provide the interest benefit on student loans. “

The Department of Education has extended its freeze on interest rates and payments for student loans held by the federal government until January 31, 2022. This is the third extension since the start of the pandemic.

What happens when the Department of Education fails to collect student loan debt?

Every time the Department of Education waives a loan, it removes a financial burden for someone with a higher education. At the same time, the department is losing money owed to it.

When we talk about 43 million borrowers who owe over $ 1.7 trillion, the cost of forgiveness can add up quickly. Even the tailor-made relief provided by the ministry so far in 2021 is $ 9.5 billion.

How does the department operate without these funds? Could loan cancellation affect the budgets of other aid programs? What about everyone else with student loan debt?

The Education Department did not respond when The Penny Hoarder asked these questions. However, a recent Brookings report by Adam Looney sheds light. Looney is a non-resident senior researcher at Brookings, a former deputy assistant secretary in the US Treasury Department, and a tax policy expert.

“Even modest student loan cancellation proposals are incredibly expensive and use federal spending that could advance other goals,” Looney said in his report.

He argues that blanket student loan cancellation tends to benefit whiter, better-educated, higher-income people who may not need the help as much as others. And while in good spirits, the cost of a blanket pardon rivals spending on UI, food aid programs, and other government programs for Americans who need help the most.

Looney clearly favors more tailored loan cancellation programs. And while President Joe Biden has expressed support for a large student loan forgiveness, his administration appears to be taking Looney’s advice.

Adam Hardy is a journalist and editor based in St. Petersburg, Florida. He covers personal finance, odd-job economics, government benefit programs, and other ways to make and manage money, and is a former editor of The Penny Hoarder. Connect with him on Twitter @hardyjournalism.

This was originally posted on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through practical and inspiring advice, as well as to resources on how to earn, save and manage money.

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