$5.8 billion in federal student loan debt forgiven among over 323,000 borrowers

Over 323,000 borrowers who have a total and permanent disability will receive more than $5.8 billion in student loan forgiveness due to a new regulation announced today by the U.S. Department of Education. The change will apply to borrowers who are identified through an existing data match with the Social Security Administration. It will begin with the September quarterly match with SSA. The Department is also announcing two other policy items related to TPD today. First, 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. Second, the Department will then pursue the elimination of the three-year monitoring period required under current regulations during the negotiated rulemaking that will begin in October.

“Today’s action removes a major barrier that prevented far too many borrowers with disabilities from receiving the total and permanent disability discharges they are entitled to under the law,” said U.S. Secretary of Education Miguel Cardona. “From day one, I’ve stressed that the Department of Education is a service agency. 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. This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support.”

This new regulation allows the Department to provide automatic TPD discharges for borrowers who are identified through administrative data matching by removing the requirement for these borrowers to fill out an application before receiving relief. The Department removed this application barrier in 2019 for borrowers identified as eligible for a TPD discharge through the match with the U.S. Department of Veterans Affairs. However, it had not yet done so for those identified through the data match with SSA. As a result, only about half of borrowers identified as eligible for TPD through the SSA match have received the discharge, causing thousands to stay in repayment or possibly even default.

This change will go into effect with the Department’s next quarterly data match with SSA, which will occur in September. Borrowers will receive notices of their approval for a discharge in the weeks after the match and the Department expects that all discharges will occur by the end of the year. Borrowers who wish to opt out of their discharge for any reason will have an opportunity to do so. All discharges will be free from federal income taxation but there may be some state income tax consequences. Borrowers will be and are encouraged to consult their state’s tax office to understand whether this discharge will be considered income under their state’s tax code.