Biden administration waives rule for disabled borrowers that cancels $1.3bn in student loan debt

Eligible borrowers would no loner need to submit income information under the new requirement

The Biden administration has taken more steps to address student debt by implementing relief measures for borrowers with total and permanent disabilities.

Previously, in a rule created under the Obama administration, anyone who was determined to be physically disabled by a physician, the Social Security Administration, or the Department of Veteran Affairs was then eligible to have their federal student debt cancelled.

Those who qualified were then in a three-year monitoring period where they were required to submit paperwork to show their income level and that it never went above the poverty line.

The Department of Education announced on Monday that it would now waive the requirement for eligible borrowers to submit income information during the coronavirus pandemic.

"These changes will ensure no borrowers are at risk of having their loans reinstated, meaning they would have to repay their debt – for failure to provide earnings information during the Covid-19 emergency," the department said in a press release.

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According to the press release, this decision would help an estimated 230,000 borrowers, including 41,000 people who had $1.3bn in loans reinstated. Now those borrowers will get their discharges back and be refunded for any payments made during Covid-19.

"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," said Education Secretary Miguel Cardona in the 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."

This move comes after the Government Accountability Office released a report in 2016 showing that 98 per cent of reinstated disability discharges happened because the borrowers failed to submit the proper paperwork, not because their income rose above the poverty level. So the Monday announcement would prevent these instances from happening to borrowers.

Eligible borrowers would now see their loans return to a discharge status in the coming weeks following the announcement.

But advocates for student loan borrowers have criticised the Biden administration for not taking bolder steps to help those in the disability discharge program, such as providing automated relief to borrowers.

"Even the Trump Administration automated debt relief for veterans determined to be totally and permanently disabled," said Alex Elson, an attorney and co-founder of the student loan advocacy group, Student Defense, Forbes reported. "There is absolutely no reason the Biden Administration should be refusing to do the same thing. The Department should waive negotiated rulemaking and issue a new regulation that automates discharges for these borrowers."

The Biden administration was anticipated to make more moves regarding student loan forgiveness this week, according to reports. One move would expand emergency student loan protections to cover additional student loans.

Currently, under the CARES Act, collections on defaulted federal student loans was suspended. This suspension was extended by President Joe Biden until 30 September, 2021. But suspension of collection on defaulted loans only applied to federal loans specifically given out by the federal government. Other federal loans could still collect on defaulted loans. Now the Biden administration was looking to suspend this collection as well.

But most of the policy changes made under the Biden administration regarding student loan debt have only provided temporary relief for borrowers, such as suspending their loan payments, or permanent relief to a small segment of the population.

Activists of student loan forgiveness were pushing the Biden administration to make bigger steps to assist borrowers in addressing their student loan debt.