Story at a glance

  • More than 40,000 Americans who were granted loan forgiveness because of disabilities but failed to submit paperwork had their debt reinstated.
  • The Department of Education announced it would relax the rules during the coronavirus pandemic.
  • As a result, those same Americans will have a combined $1.3 billion in student debt forgiven.

The Department of Education cancelled $1.3 billion in federal student loan debt for borrowers with disabilities on Monday, a major step by the Biden administration towards addressing the country’s mounting student debt

"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 a 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."   


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While the announcement came as a relief for more than 230,000 borrowers, some of them had already had their loans forgiven — and then reinstated after failing to provide certain paperwork. Federal student loan borrowers can have their debt discharged due to "total and permanent disability” on two conditions: they fall below a certain income threshold, and they provide the department with information about their earnings. If you fail to meet one of those conditions, then your loans are reinstated — and a 2016 report found that failing to file that paperwork accounts for 98 percent of borrowers whose loans were reinstated. 

Now, more than 41,000 borrowers will again have their debt discharged and any payments they made during the coronavirus pandemic returned, dating back to March 13, 2020, “the start of the COVID-19 national emergency.” Another 190,000 borrowers will be spared the paperwork for the foreseeable future, or at least through Sept. 30, 2021. The agency is also extending some relief to Americans who defaulted on their federal student loans. 


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“At a time when many student loan borrowers have faced economic uncertainty, we’re ensuring that relief already provided to borrowers of loans held by the Department is available to more borrowers who need the same help so they can focus on meeting their basic needs,” said Cardona. “Our goal is to enable these borrowers who are struggling in default to get the same protections previously made available to tens of millions of other borrowers to help weather the uncertainty of the pandemic.”  

What does this mean for you? Well, if you’re not part of the Federal Family Education Loan Program (FFEL), then it’s probably not going to affect you. But if you’re one of the 1.14 million who defaulted on your FFEL, you may have been at risk of losing your federal tax refunds to repay the loan. Now, however, the federal government is granting these borrowers a reprieve, pausing collection of the loan as well as any interest accumulated in the last year. And, since this relief is backdated to March 13, 2020, any loans that went into default after this date will be returned to good standing — which could mean a bump in your credit rating. 


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Published on Mar 31, 2021