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Biden administration waives rule for disabled borrowers, but advocates say much more could be done

Secretary of Education Miguel Cardona participates in a briefing at the White House on March 17. (Leah Millis/Reuters)
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The Education Department is ensuring that 230,000 disabled borrowers approved for loan forgiveness are not derailed by paperwork during the pandemic, but advocates say the agency can help nearly twice as many by automating the process.

Anyone who is declared by a physician, the Social Security Administration or Department of Veterans Affairs to be totally and permanently disabled is eligible to have their federal student debt canceled. Those who benefit are subject to a three-year monitoring period, in which they must submit annual documentation verifying their income does not exceed the poverty line.

Sidelined by disability and saddled with student loans

On Monday, the department said it will waive the paperwork requirement during the coronavirus pandemic, retroactive to March 13, 2020, when President Donald Trump declared a national emergency.

The agency estimates the move will help more than 230,000 borrowers, including 41,000 who had a total of $1.3 billion in loans reinstated during the health crisis for failing to verify their earnings. Those who lost their discharge amid the pandemic will regain the benefit in coming weeks.

“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 statement. “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.”

Trump administration to automatically forgive the student debt of permanently disabled veterans

Consumer groups say issuing a waiver is merely tinkering around the edges of a troubled system when bolder moves are needed. Some had anticipated that the Biden administration would automatically discharge the federal student loans of eligible borrowers, rather than require them to submit an application for debt forgiveness.

“Let’s be clear: Today’s announcement is not a victory for students,” Alex Elson, an attorney at the D.C.-based nonprofit National Student Legal Defense Network, said about the waiver Monday. “There are roughly 400,000 borrowers with disabilities who … are legally owed debt relief. The Department of Education knows exactly who they are but is choosing to do nothing for them.”

Working with the Social Security Administration since 2016, the Education Department has been identifying borrowers receiving disability payments and have the specific designation of “Medical Improvement Not Expected,” which indicates they are eligible for the discharge.

The agencies ultimately found about 400,000 matches and encouraged those borrowers to apply, but few did. Nearly 70 percent of those eligible borrowers, who hold an estimated $14 billion in student debt, have not received relief, according to data the department provided Congress.

A bipartisan coalition of congressional lawmakers, including Sens. Christopher A. Coons (D-Del.) and Rob Portman (R-Ohio), had urged Trump to automatically discharge the debt, much like his administration had done in 2019 for permanently disabled veterans. But the Trump administration failed to act, while hundreds of thousands of disabled borrowers defaulted on their loans.

On a call with reporters Monday, a senior Education Department official said automating disability discharges would require new rulemaking and a renegotiation of the agreement the agency has with the Social Security Administration. The department is looking into the option among others to streamline the process but cautioned that it would take time to execute.

Elson argues the department “should waive negotiated rulemaking and issue a new regulation that automates discharges for these borrowers,” which is what the Trump administration did for veterans. Attorneys at Student Defense, he said, are evaluating the legal options to get disabled borrowers timely relief.

The existing disability discharge process has been widely criticized for being difficult to navigate and excessively complicated. A 2016 Government Accountability Office review of the program found borrowers were routinely derailed by the income verification process because the Education Department failed to clearly state that failure to submit the form would lead to their loans being reinstated.

About 98 percent of reinstated disability discharges happened not because earnings were too high, but because borrowers simply did not submit the requested documentation, according to the GAO. Critics of the process say the bureaucracy bolsters the argument for automation.