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Education Dept. to Forgive $5.8B in Student Loans to Disabled Borrowers

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What You Need to Know

  • The program will erase debt owed by 323,000 borrowers who are per
  • The DOE also announced an interest waiver on loans for more than 47,000 current and former active-duty service members.
  • Many student loan borrowers and their advocates want the administration to go further.

The U.S. The Department of Education will forgive approximately $5.8 billion in federal student loans owed by more than 323,000 borrowers who are permanently disabled.

The discharges will begin in September after borrowers are identified through a data match with the Social Security Administration, which pays their disability benefits.

A similar loan forgiveness program had been instituted for permanently disabled veterans under the previous administration, but that program was initially marred by delays.

The Biden administration’s DOE also announced a waiver on interest payments for student loans held by more than 47,000 current and former active-duty service members for loans made on or before Oct. 1, 2008. A data matching agreement with the Defense Department allows for that waiver.

Both new loan forgiveness initiatives are automatic. Borrowers will not have to request loan forgiveness or provide the DOE with any information, such as earnings in the case of disabled borrowers, or proof of active duty for veterans, to qualify for the new programs.

Both programs follow the administration’s announcement extending the moratorium on federal student loan interest payments until Jan. 31, 2022, which will be the final extension, according to the DOE.

The moratorium began in March 2020 under the CARES Act and was extended several times under then-President Donald Trump and once before under President Joe Biden.

Now many student loan borrowers and their advocates, including members of Congress, are waiting for the Biden administration to forgive some of the $1.7 trillion in federal student loan debt owed by about 45 million Americans. Advocates say he has that authority. The administration isn’t so sure. Biden has asked the Justice Department and the DOE to review the legality of canceling federal student loan debt.

Student financial aid expert Mark Kantrowitz expects those reviews will likely be referred to the White House before the latest loan payment moratorium ends. He says any forgiveness program would require approval by Congress and could be included in a budget reconciliation bill.

Biden has supported the erasure of $10,000 per borrower; Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and several Democratic House members including Rep. Ayanna Pressley want $50,000 worth of forgiveness.

Kantrowitz estimates forgiving $10,000 per borrower would cost the federal government $377 billion, and a $50,000 waiver would cost about $1 trillion. The latter is not five times as much the former because fewer students owe $50,000, Kantrowitz explained.

(Image: Shutterstock)