Student debt relief will soon become significantly more accessible to borrowers with disabilities. Under federal law, student loan borrowers who are totally and permanently disabled (TPD), or who have disabilities that limit their ability to work for an extended period, are eligible to have their federal student loans discharged. However, disabled borrowers face onerous administrative hurdles that prevent many eligible borrowers from obtaining this relief. In fact, in the last decade, administrative obstacles have led more than half a million borrowers with disabilities to have their student loans reinstated after receiving TPD discharges. To address this problem, the U.S. Department of Education (ED) has proposed a new rule that will eliminate paperwork obstacles and expand eligibility for relief to more disabled borrowers. The new rule could provide disabled borrowers with around $20 billion in additional debt relief over the next ten years.
The new rule is the latest in a succession of U.S. Department of Education actions to improve disabled borrowers’ access to loan relief. Prior to these reforms, borrowers with disabilities, including those already identified as “totally and permanently disabled” by the U.S. Department of Veterans Affairs (VA) or Social Security Administration (SSA), had to affirmatively apply to the Department of Education for a loan discharge. Many disabled borrowers did not apply because they did not know that they were eligible for a loan discharge, while others were unable to access relief due to the cumbersome and complex application process.
The paperwork required to apply for loan discharges prevented thousands of eligible borrowers with disabilities from getting relief: in 2019, the Department of Education identified 365,000 borrowers who had been deemed “totally and permanently disabled” by other federal agencies and who had not yet obtained student loan discharges. Of these borrowers, 225,000 had already defaulted on their loans and suffered from the consequences of default, including garnishment of their disability benefits.
In 2019, the Department of Education identified 365,000 borrowers who had been deemed “totally and permanently disabled” by other federal agencies and who had not yet obtained student loan discharges.
In 2019, ED took a major step to reduce the red tape preventing many disabled borrowers from obtaining loan relief. The department issued a rule that provided that disabled veterans who were identified as totally and permanently disabled by the VA would be automatically approved for loan discharges through a “data match” process, and would no longer have to affirmatively apply for a discharge. ED later expanded the automatic approval process to certain categories of disabled borrowers identified by the SSA. These actions helped tens of thousands of disabled borrowers get loan discharges.
However, disabled borrowers still faced cumbersome and unnecessary paperwork hurdles. Department of Education regulations impose yet another administrative obstacle after TPD borrowers have been approved for debt relief: borrowers are required to provide income documentation during a three-year period following approval. If a borrower fails to provide income documentation during this period showing that their income remains under the income threshold, the borrowers’ loans are reinstated.
Hundreds of thousands of borrowers have had their loans reinstated because they did not submit the required documentation of income. In fact, more than half of all borrowers approved for TPD discharge have their loans reinstated after initial approval as a result of not meeting documentation requirements. The vast majority of these borrowers actually meet income eligibility requirements: an ED analysis using Internal Revenue Service (IRS) data found that 92 percent of borrowers whose loans were reinstated during the monitoring period did not have income that exceeded the earnings threshold. To make matters worse, ED does not verify the accuracy of the income information submitted during the monitoring period, underscoring that the documentation requirements are unnecessary.
In March 2021, ED suspended the post-approval income monitoring requirements for disabled borrowers during the COVID-19 emergency. This action helped more than 230,000 disabled borrowers who were subject to monitoring, including more than 40,000 who had loans reinstated during the monitoring period. The new rule announced this month will permanently end the three-year post-approval income monitoring period. Eliminating the income-monitoring requirements will ensure that eligible borrowers do not lose access to relief due to paperwork hurdles.
More than half of all borrowers approved for TPD discharge have their loans reinstated after initial approval as a result of not meeting documentation requirements.
The new rule will also streamline the application process for those borrowers who are not captured in the automatic process and must affirmatively apply for relief. These borrowers include disabled borrowers who have reached retirement age and receive SSA retirement benefits, rather than disability benefits. This group no longer appears in the categories that the SSA uses to classify disability, and so will not be captured in the SSA/ED data match process. The new rule eases the application process for those borrowers and others who must affirmatively apply for relief by expanding the type of allowable documentation that can be submitted as evidence of a qualifying disability status.
The rule also eases the burden on borrowers who must affirmatively apply for loan discharges by expanding the categories of health professionals who are authorized to certify that a borrower is totally and permanently disabled. The new rule provides that licensed nurse practitioners, physician’s assistants, and clinical psychologists may certify an applicant. This expansion will make applying for relief significantly easier for borrowers who lack access to a doctor, including those who live in low-income or rural areas facing doctor shortages.
Finally, the new rule would expand the categories of disability status that qualify for debt relief. Under the current rule, borrowers can qualify for loan relief if they are classified as “Medical Improvement Not Expected” (MINE) by the SSA. The new rule expands eligibility to borrowers to several additional SSA disability statuses where the borrower has been in the status for at least five years prior to applying for loan relief.
The new rule will significantly expand disabled borrowers’ access to debt relief. The rule will make it substantially easier to apply for, and keep, student loan discharges. It will also expand eligibility for debt relief to more disabled borrowers, bringing the regulations into better alignment with statute and ensuring that more disabled borrowers get the relief that they are entitled to under federal law. Together, these changes will result in life-changing debt relief for tens of thousands of disabled borrowers.