Photo of a woman looking at a laptop. She is using a wheelchair. Photo by Marcus Aurelius from Pexels.
Photo by Marcus Aurelius from Pexels

On August 19, 2021, the U.S. Department of Education announced that over 323,000 borrowers who have a total and permanent disability (TPD) will receive more than $5.8 billion in automatic student loan discharges due to a new regulation. The change will apply to borrowers who are identified through an existing data match with the Social Security Administration (SSA). It will begin with the September quarterly match with SSA.

The Department also announced two other policy items related to TPD. The Department will indefinitely extend the policy announced in March to stop asking these borrowers to provide information on their earnings – a process that results in the reinstatement of loans if and when borrowers do not respond – beyond the end of the national emergency. The Department will also pursue the elimination of the three-year monitoring period required under current regulations during the negotiated rulemaking that will begin in October of 2021.

U.S. Secretary of Education, Miguel Cardona, said: “Today’s action removes a major barrier that prevented too many borrowers with disabilities from receiving the total and permanent discharges they are entitled to under the law. We serve students, educators, and families across the country to ensure that educational opportunity is available to all. 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 change reduces red tape with the aim of making processes as simple as possible for borrowers who need support.”

More Details About the New Policy Items

One new policy item allows the Department of Education to provide automatic discharges for borrowers who are identified through administrative data by removing the requirement for these borrowers to fill out an application before receiving relief. This change will go into effect in September of 2021.

In 2019, the Department of Education removed that requirement for a TPD discharge through the match with the U.S. Department of Veterans Affairs (VA). Now, the Department of Education is removing that same requirement for people identified through the data match with SSA.

Previous to this new change, the Department of Education stated that only about half of borrowers identified as eligible for TPD through the SSA match have received the discharge of their student loans. The Department believes that the previous policy caused “thousands to stay in repayment or possibly even default”.

It is important to know that the Department of Education expects that all who are eligible for discharges of their student loans will receive their notices of approval in the weeks after an SSA match. It is expected that all discharges will occur by the end of the year. The discharged student loans will be free from federal income taxation. However, people need to check with their state to see if there is an income tax consequence. Some states might consider the discharge of a student loan as “income”.

The other policy permanently removes the “three-year monitoring period”. This was required of any borrower of a student loan who received a TPD discharge through the SSA match or the physician’s certification process was subject to being monitored for a three-year income period.

The Department of Education stated that during that process, a person with a total and permanent disability (TPD) could lose the discharge of their student loan if the person’s earnings were above a certain threshold. They can also lose it if they don’t respond to a request for earnings information.

In 2016, the United States Government Accountability Office (GAO) reported in a study that “the vast majority of borrowers of any age whose loans were reinstated – 98 percent in fiscal year 2015 – had this occur because they did not submit the annual income verification form.”

The GAO also stated: We found the that the high number of loans reinstated because the borrower did not provide the annual income verification form results from unclear annual reporting requirements. Specifically, documentations provided by Education to borrowers in the 3-year monitoring period does not clearly and prominently state all requirements to report income annually. Federal agencies are directed to use language that is clear, concise, and well-organized that the public can understand in documents that explain how to comply with requirements the federal government administers or enforces.

There are more details in the study. One that caught my attention was this:

…In particular, the TPD discharge approval form sent to borrowers states that violating certain requirements will result in loan reinstatement, such as earning income from employment above the poverty guideline amount for a family of two in their state. However, the additional annual reporting requirement may be unclear because the form does not explicitly state that the loan will be reinstated if the borrower does not return the annual income verification form – even if they have no earnings – to document that their earnings from employment are below the poverty guideline for a family of two in their state…

As a result, the Department of Education will indefinitely stop sending automatic requests for earnings even after the national emergency ends. (My best guess is the “national emergency” they refer to is COVID-19). The Department will also propose eliminating the monitoring period entirely in the upcoming negotiated rulemaking that will begin in October of 2021.

Why This Matters

According to NPR, the U.S. Department of Education is discharging the outstanding student loans of more than 323,000 borrowers who have significant, permanent disabilities. The Department will also remove barriers for borrowers who qualify for this relief in the future. This change in policy marks a significant step toward fixing a troubled debt relief program meant to help borrowers with disabilities.

The Social Security Administration (SSA) pointed out just how limited people who are beneficiaries of SSA are expected to somehow live on: …At the beginning of 2019, Social Security paid an average monthly disability benefit of about $1,234 to all disabled workers. That is barely enough to keep a beneficiary above the 2018 poverty level ($12,140 annually). For many beneficiaries, their monthly disability payment represents most of their income…

The Department of Education’s new policies end a series of cruelties imposed upon people who have total and permanent disabilities. This group of people are especially vulnerable of falling behind in student loan debt if their loans are reinstated.

U.S. Department of Education Discharges Student Loans is a post written by Jen Thorpe on Book of Jen and is not allowed to be copied to other sites.

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