New| Automatic Total and Permanent Disability Discharge Program
Updated: Jun 6
Borrowers who have been determined to be totally and permanently handicapped through data matching with the Social Security Administration (SSA) will now have their federal student debts cancelled automatically. This group of student borrowers will no longer need to complete an application to have their loans discharged.
This new procedure began in September 2021 and will be repeated every three months thereafter. The DOE anticipated that all borrowers identified in the September SSA data match would be discharged by the end of 2021. In the weeks after the September data match, if you were affected by this change, you should have been notified of your eligibility for automatic Total and Permanent Disability (TPD) discharge. If the borrower’s disability is not on file with the SSA or VA, they will still need to apply for a disability discharge of their student loans. More than 323,000 borrowers are expected to receive approximately $5.8 billion in federal student loan relief as a result of this adjustment. For those that do receive a loan discharge under the program, there will not be any federal taxes owed on the forgiven loans, but there may be state taxes to pay.
The Department also announced a permanent modification to rules that have caused too many borrowers to lose their discharges. In the past, a borrower who received a TPD release through the SSA match or a physician's certification process was subject to a three-year income monitoring period, according to the regulations. If the borrower's wages exceed a specific threshold or they do not answer a request for earnings information during this time, the borrower’s discharge was voided. According to a 2016 audit by the Government Accountability Office, borrowers failed to submit needed evidence in 98 percent of the reinstated disability discharges; NOT because their earnings were too high. Late in March 2021, the Treasury Department reinstated $1.3 billion in debt discharges for 41,000 borrowers who had their loans reinstated after failing to answer inquiries for earnings information. To address these reinstatement concerns, the Department will adopt both short- and long-term measures. Even after the national emergency ends, the Department will suspend issuing automated requests for earnings information indefinitely. This follows a policy established by the Department in March 2021 for the duration of the national emergency. In the upcoming meetings, which begin in October 2021, the Department will propose completely abolishing the three-year monitoring period. The Biden-Harris Administration has now authorized nearly $8.7 billion in student debt discharges for over 455,000 students as a result of this latest TPD action.
Additional Relief from the DOE
Since March 2021, the DOE has also issued more than $1.5 billion in discharges for nearly 92,000 borrowers whose institutions took advantage of the borrower defense to repayment procedure. Furthermore, the Department of Education has prolonged the moratorium on student loan payments, interest, and collections until January 31, 2022, saving 41 million borrowers billions of dollars per month.
What if I'm Disabled but Don't Qualify for Discharge?
If you don't meet the requirements for a TPD discharge, but you still have a hard time keeping up with your monthly payments because of your disability, there are financial assistance programs available for other aspects of your finances that can potentially help make room in your budget. If you or someone you know has been permanently disabled or experienced a significant change in income or family size over the last 12 months, contact TitanPrep today for more information.