Loan Relief for Borrowers With Disabilities

The Education Department has announced that people who have disabilities that make them eligible for federal student loan discharges will now have one hoop fewer to jump through -- at least for the duration of the pandemic.

Borrowers who can prove they are “totally and permanently” disabled have historically been eligible to have their federal student loans discharged by the department, but they must turn in annual paperwork for three years verifying that they meet income requirements. Now the department has announced that people who failed to turn in that paperwork during the pandemic and lost their right to a discharge -- approximately 41,000 people with $1.3 billion in debt -- will have those decisions reversed and any payments refunded. Other borrowers who are still in that three-year monitoring period -- about 190,000 people -- will no longer be asked to turn in paperwork regarding income for the remainder of the pandemic.

“Borrowers with total and permanent disabilities should focus on their well-being, not put their health on the line to submit earnings information during the COVID-19 emergency,” Education Secretary Miguel Cardona said in a press release. “Waiving these requirements will ensure no borrower who is totally and permanently disabled risks having to repay their loans simply because they could not submit paperwork.”

Because the discharge program was meant to offer relief to borrowers who couldn’t work due to a disability, the department requires that borrowers prove, for a period of three years, that they have an annual income under the poverty line for a family of two -- a little over $17,000 in most states. The department defines “total and permanent disability” as any condition that has affected or will affect someone for five years, or can be expected to result in death.

The change will not affect disabled borrowers who did submit their paperwork but had their loans reinstated because their income was too high. Department officials have said that that population is very small. A 2016 report from the Government Accountability Office found that borrowers who failed to turn in any paperwork at all made up 98 percent of people who had their loans reinstated.

The change will also not affect what borrowers are required to submit after the pandemic ends.

Some advocates have said that the announcement from the department doesn’t go far enough to provide relief to borrowers.

“It is scandalous that the department revoked the loan discharges for 41,000 borrowers with total and permanent disabilities due to paperwork issues during a pandemic,” said Persis Yu, director of Student Loan Borrower Assistance at the National Consumer Law Center, in a statement. “While we are glad that the department has rectified this injustice, we should not cheer for the department re-cancelling loans that should have never been reinstated.”

An investigation by NPR in 2019 found that between March 2016 and September 2019, only 28 percent of eligible identified borrowers had their loans discharged. The Social Security Administration maintains records of Americans with total and permanent disabilities, but the process to get loan relief isn’t automatic. Borrowers need to opt in and take additional steps to get approved.

“We urge the department to take bold steps towards systemic reform. At a minimum, the department should provide automatic relief to the 400,000 borrowers known to qualify for a disability discharge,” Yu said in the statement. “It should also commit to never restarting the paperwork requirements that undermine the ability of borrowers with disabilities to get the relief they need.”

The current administration at the Education Department has so far demonstrated more willingness than the last to forgive and discharge federal student loan debt. Monday's announcement follows a decision by the department earlier this month to forgive $1 billion in student loan debt for borrowers who were defrauded by for-profit colleges.