Getting rid of federal student loan debt just got easier – in many cases automatic – for borrowers with disabilities.
The US Department of Education has announced that it will automatically cancel federal student loans for at least 323,000 totally and permanently incapacitated borrowers.
It is estimated that $ 5.8 billion in federal student debt will be eliminated through this initiative.
“We are delighted to see the Ministry of Education finally providing automatic discharges to the hundreds of thousands of borrowers with disabilities who have been entitled to this relief for years,” said Persis Yu, director of the Borrower Assistance Project of student loans from the National Consumer Law Center. in a report.
The ministry said it plans to identify all eligible borrowers in September, notify them soon after, and then repay the loans “by the end of the year.”
While this initiative is a great relief for eligible borrowers, there are many more who will continue to owe money. The Federal Reserve estimates that at the end of 2020, student loan debt was $ 1.7 trillion.
More Federal Student Loans News
Federal student loans have been in the news recently for a number of reasons and in a number of ways.
Loan payments have been suspended by the federal government for millions of borrowers because the pandemic has resulted in the loss of jobs for many. The Biden administration recently announced that the suspension of payments has been extended until January 31, 2022.
Note that suspension does not mean forgiveness. This means that loan payments will be suspended with no accrued interest. Borrowers will still have to repay loans as of February 1, 2022, unless there is another extension.
In addition, more than 47,000 current and former active duty members will have the interest on their loans canceled retroactively. According to a press release from the Ministry of Education, soldiers who are entitled to this benefit have been or are deployed in “areas which qualify them for imminent danger or hostile fire compensation”.
This is not a new program, and the interest-free benefit has been in place for years on loans made on or after October 2, 2008. The difference now is that better data allows the department to identify military personnel. who are eligible. In 2019, only 4,800 soldiers received the service.
The department will automatically provide the benefit to service members it deems qualified through the new file matching system.
Automatic release of student loans in the event of disability (aka forgiveness)
The Department of Education’s Total and Permanent Disability (TPD) leave program is nothing new. The automatic discharge is.
Previously, the program required all borrowers to apply for a discharge, but many eligible borrowers were unaware the program existed or were unable to apply. The automatic discharge initiative aims to remedy this.
In recent years, the Department of Education has removed some application requirements for the TPD discharge program. The ministry is getting better at identifying who is eligible for the release program as it now has access to the Social Security Administration and the Department of Veterans Affairs databases.
These federal agencies keep records of people with total and permanent disabilities. By accessing these records, the Department of Education is able to eliminate the application process for large numbers of federal student loan borrowers.
In 2019, the Department of Education began using information from the VA to eliminate the application process for eligible veterans.
With access to Social Security Administration data, the Education Ministry has now estimated that more than 323,000 people are eligible for automatic loan forgiveness.
“However, many borrowers with disabilities meet the legal requirements for a PDT discharge but will not be eligible for an automatic discharge under the data matching program,” Alpha Taylor, lawyer at National Consumer Law, told The Penny Hoarder. Center.
How to know if you qualify for an automatic loan forgiveness
Automatic loan discharge is available to federal student loan borrowers identified by the Department of Education. It identifies eligible borrowers by matching its student loan data with Social Security Administration and Department of Veterans Affairs data.
Basic 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.
If you are not receiving Social Supplementary Income (SSI) or Social Security Disability Insurance (SSDI) or if you are not a veteran who has been determined to be disabled by the VA, the Department of Education likely won’t have enough information about you to automatically discharge your federal student loans.
Likewise, if the education department does not notify you before the end of 2021, you are probably not eligible for automatic forgiveness.
However, you can still apply directly for a student loan exemption to determine your eligibility if you believe you are entitled to the relief.
“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 said. “They will still have to complete the cumbersome PDT application process and submit a physician certification to have their loans canceled.”
How to request a TPD discharge
Even if you are not eligible for the new Automatique loan forgiveness initiative, you may still be eligible for a discount. The Department of Education may simply not have enough information about you to automatically pay off your loans.
As part of the application process, you must be found to be totally and permanently disabled by one of the following:
- Social security administration (ASS)
- The Department of Veterans Affairs (VA)
- A physicist
If the SSA or VA has determined that you have an eligible disability, the Department of Education likely already has that information and will contact you.
If the education department does not contact you, you may need to provide additional documents.
In this case, your doctor – who must be a US-based Doctor of Medicine (MD) or Doctor of Osteopathy (DO) – will need to complete Section 4 of the TPD discharge request.
For assistance with the request, you can contact Nelnet, a third-party company that receives PDT requests on behalf of the Department of Education:
You can also designate someone to complete the application on your behalf if you are unable to do so yourself. Just make sure that this person completes the “Appointment of Applicant Representative” form instead.
Other changes to the TPD release for student loans
In its recent announcement, the Department of Education unveiled additional changes that will ease the administrative burden on borrowers with disabilities whose loans have been canceled.
Previously, canceling your loans was only half the battle. If you were approved, the education department would then send out automatic requests for income information, which Taylor called “rigorous.” And if you didn’t respond or your income was too high, your loans may have been reinstated.
According to a 2016 Government Accountability Office report, 98% of the loans that had been reinstated were due to the borrower’s failure to respond to the ministry’s request.
Due to the pandemic, the Education Ministry suspended sending such income requests in March – but will now “extend indefinitely” the hiatus beyond the pandemic.
The now defunct income application process is part of a three-year income monitoring period for people whose loans are canceled. For those who qualify through the VA, the monitoring period is not required.
Now the Education Department has said it is seeking to remove the income monitoring period for all program participants, not just veterans.
“Eliminating the income monitoring period will ensure that borrowers with disabilities are not dragged into the burden of student debt after a release from TPD,” Taylor said.
Adam Hardy is a former editor of The Penny Hoarder who specializes in stories about the concert economy. He graduated from the University of South Florida, who studied magazine journalism and sociology.
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.