Getting rid of federal student loan debt has just become easier — in many cases automatic — for borrowers with qualifying disabilities.
The U.S. Department of Education announced that it will automatically forgive federal student loans for at least 323,000 borrowers who have total and permanent disabilities.
An estimated $5.8 billion in federal student loan debt will be wiped out through this initiative.
“We are excited to see the Department of Education finally provide automatic discharges to the hundreds of thousands of disabled borrowers who have been entitled to this relief for years,” Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, said in a statement.
The Department stated it plans to identify all eligible borrowers in September, notify them shortly afterward and then discharge the loans “by the end of the year.”
While this initiative will be a big relief to the borrowers who qualify, there are many more who will continue to owe money. The Federal Reserve estimates that at the end of 2020, the student loan debt was $1.7 trillion.
More News About Federal Student Loans
Federal student loans have been in the news recently for a couple of reasons and in a couple of ways.
Loan payments have been suspended by the federal government for millions of borrowers because the pandemic resulted in loss of jobs for many. The Biden administration recently announced that the suspension of payments has been extended through Jan. 31, 2022.
Note that the suspension does not mean forgiveness. It means that loan payments will be on pause with no interest accruing. Borrowers will still have to pay off the loans beginning Feb. 1, 2022, unless there is another extension.
Also, more than 47,000 current and former active-duty service members will have the interest on their loans retroactively waived. Military personnel who qualify for this benefit were or are deployed to “areas that qualify them for imminent danger or hostile fire pay,” according to a Department of Education press release.
This is not a new program and the no-interest-accrual benefit has been in place for years on loans disbursed on or after Oct. 2, 2008. The difference now is that better data is allowing the department to identify military personnel who qualify. In 2019, only 4,800 service members received the benefit.
The department will automatically provide the benefit to service members that it deems qualified through the new records matching system.
Automatic Student Loan Disability Discharge (aka Forgiveness)
The Department of Education’s total and permanent disability (TPD) discharge program is not new. Automatic discharge is.
Previously, the program required all borrowers to apply for a discharge, but many eligible borrowers didn’t realize the program existed or were not able to apply. The automatic discharge initiative seeks to remedy that.
In recent years, the Department of Education has been removing some application requirements for the TPD discharge program. The department is getting better at identifying who’s eligible for the discharge program because it now has access to databases from the Social Security Administration and the Department of Veterans Affairs.
Those federal agencies keep records on people with total and permanent disabilities. By gaining access to these records, the Department of Education is able to eliminate the application process for a large number of federal student loan borrowers.
In 2019, the Department of Education started using information from the VA to eliminate the application process for qualifying veterans.
With access to Social Security Administration data, the Department of Education has now estimated more than 323,000 people are eligible for automatic loan forgiveness.
“However, there are many disabled borrowers who meet the legal requirements for a TPD discharge but will not qualify for automatic discharge under the data matching program,” Alpha Taylor, a staff attorney at the National Consumer Law Center, told The Penny Hoarder.
How to Know If You’re Eligible for Automatic Loan Forgiveness
Automatic loan discharge is available to federal student loan borrowers who the Department of Education has identified. It identifies eligible borrowers by matching its student loan data with the data from the Social Security Administration and the Department of Veterans Affairs.
Basic discharge qualifications include:
- Participation in a federal student loan program (i.e. William D. Ford Federal Direct Loan program, Federal Family Education Loan program, Federal Perkins Loan program and/or the TEACH Grant service program).
- A total and permanent disability that prevents you from working.
If you are not receiving Social Supplemental Income (SSI) or Social Security Disability Insurance (SSDI) or you’re not a veteran who’s been determined to be disabled by the VA, the Department of Education will likely not have enough information on you to automatically discharge your federal student loans.
Likewise, if the education department doesn’t notify you before the end of 2021, you likely are not eligible for automatic forgiveness.
You can, however, still apply directly for student loan forgiveness to determine your eligibility if you think you’re 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 overly burdensome TPD application process and submit a physician certification to have their loans discharged.”
How to Apply for TPD Discharge
Even if you’re not eligible for the new automatic loan forgiveness initiative, you may still be eligible for forgiveness. It could be that the Department of Education simply doesn’t have enough information on you to discharge your loans automatically.
In this case, you will need to apply for a TPD discharge online or print out the application and mail it in.
As part of the application process, you must be found totally and permanently disabled by one of the following:
- The Social Security Administration (SSA)
- The Department of Veterans Affairs (VA)
- A physician
If the SSA or VA has determined you have a qualifying disability, the Department of Education likely already has this information and will reach out to you.
If the education department does not reach out to you, you may need to provide additional documentation.
In this case, your physician — who must be a U.S.-based doctor of medicine (M.D.) or doctor of osteopathy (D.O.) — will need to fill out Section 4 of the TPD discharge application.
For assistance with the application, you can contact Nelnet, a third-party company that receives the TPD applications on behalf of the Department of Education:
- Via email at [email protected]
- By phone at 1-888-303-7818, Monday to Friday 7 a.m. to 2 a.m. and Saturday 8 a.m. to 7 p.m. Eastern time
You can also designate someone to complete the application on your behalf if you’re unable to do so yourself. Just be sure to have that person fill out the “Applicant Representative Designation” form instead.
Other Changes to TPD Discharge for Student Loans
In its recent announcement, the Department of Education unveiled additional changes that will relieve the administrative burden on disabled borrowers whose loans were forgiven.
Previously, getting your loans discharged was only half the battle. If you were approved, the education department would then send out automatic requests for income information, which Taylor described as “rigorous.” And if you did not respond or your earnings were too high, your loans may have been reinstated.
According to a 2016 report from the Government Accountability Office, 98% of the loans that had been reinstated were due to the borrower not responding to the department’s request.
Due to the pandemic, the Department of Education paused sending out these income requests in March — but will now “indefinitely extend” the pause beyond the pandemic.
The now defunct income request process is part of a three-year income monitoring period for people whose loans are forgiven. For those who qualify through the VA, the monitoring period isn’t required.
Now, the education department said it’s seeking to remove the income monitoring period for everyone in the program, not only veterans.
“The elimination of the income monitoring period will ensure that disabled borrowers are not dragged back into the burden of student debt after a TPD discharge,” Taylor said.
Adam Hardy is a former staff writer for The Penny Hoarder who specializes in stories on the gig economy. He’s a University of South Florida graduate, who studied magazine journalism and sociology.