Education Department to erase $5.8M in student loans for borrowers with disabilities

Aug. 19 (UPI) -- The Education Department on Thursday announced it will automatically discharge student loans for borrowers who have total and permanent disabilities.

The action will affect more than 323,000 borrowers who are identified through an existing match with the Social Security Administration and erase about $5.8 billion in student debt beginning in September.

Also Thursday, the Education Department said it would indefinitely extend a policy to stop asking borrowers with total and permanent disabilities to provide information on their earnings and seek to eliminate the requirement of a three-year income monitoring period.

U.S. law allows anyone who is declared totally and permanently disabled by a physician, the Social Security Administration or the Department of Veterans Affairs to have their federal student loans discharged.

Education Secretary Miguel Cardona on said the changes make it easier for borrowers to receive their relief by removing the requirement that they fill out an application.

"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 law," Cardona said.

The department added that all discharges will occur by the end of the year and will be free from federal income taxation but could result in state income tax consequences.

Borrowers who wish to opt out will also be given the opportunity to do so.

Persis Yu, a staff attorney at the National Consumer Law Center, told NPR that Thursday's move marks a first step toward improving the discharge program.

"This is a huge deal for the hundreds of thousands of borrowers who are entitled to this relief and frankly, it's very long overdue," Yu said.

Yu added, however, that some borrowers who should be getting loan discharges are not identified in the Social Security Administration's match.

"We also hope that the department will look at the eligibility criteria that it uses to determine when someone has a disability discharge," he said.