Biden Administration Wipes Out $5.8B in Student Loan Debt for Over 300,000 Borrowers

The Biden administration is automatically wiping out over $5.8 billion in student loan debt for over 300,000 borrowers living with serious disabilities that makes them unable to earn sufficient income, the Associated Press reported.

The federal government's current rules provide student loan relief for those that are "totally and permanently disabled" and don't earn enough but only if documented proof of a disability is submitted alongside a three-year monitoring period of one's income.

Now, beginning September, the Education Department will start wiping out student debt for 323,000 citizens identified as permanently disabled on their Social Security records. The three-year income monitoring period is expected to be taken away during a federal rule making process that begins in October.

"This is going to be a smooth process for our borrowers," said Education Department Secretary Miguel Cardona during a call with reporters. "They're not going to have to be applying for it or getting bogged down by paperwork."

For more reporting from the Associated Press, see below.

Education Department Secretary Miguel Cardona
The Biden administration is wiping out over $5.8 billion in student loan debt for over 300,000 borrowers. In this photo, Dr. Miguel Cardona, now Education Department secretary, speaks during an event announcing his nomination at The Queen in Wilmington, Delaware, on December 23, 2020. Nicholas Kamm/AFP via Getty Images

The move to wipe out the billions in debt marks the start of a broader overhaul of a program that has been criticized for having overly burdensome rules.

"We've heard loud and clear from borrowers with disabilities and advocates about the need for this change and we are excited to follow through on it," Cardona said in a statement.

Tens of thousands of people have been dropped from the program and had their loans reinstated simply because they failed to submit proof of their earnings, however, and critics say the complex rules deter some from applying.

Advocates have pressed the Education Department to eliminate the monitoring period entirely and to provide automatic debt relief to people who the Social Security Administration already identifies as permanently disabled.

Under the new action, both demands will be met.

Borrowers will be notified once they have been approved for relief. All of the loans are expected to be discharged by the end of the year.

The department also plans to eliminate the program's three-year monitoring period, which was previously suspended during the pandemic.

Advocates celebrated the change as a victory. Aaron Ament, president of the National Student Legal Defense Network, called it a "life-changing" step.

"This is a huge moment for hundreds of thousands of borrowers with disabilities who can now move on with their lives and won't be trapped in a cycle of debt," he said.

The program has faced scrutiny since 2016, when a federal watchdog agency found that the income reporting process posed an obstacle for borrowers. In 98 percent of cases in which loans were restored, it was because borrowers did not submit paperwork, not because their earnings were too high, the U.S. Government Accountability Office reported.

The Trump administration started granting automatic loan cancellations to eligible military veterans in 2019, but the move did not apply to hundreds of thousands of other Americans with disabilities.

In March, the Education Department canceled debt for more than 40,000 borrowers whose debt had been restored because of paperwork issues, but it indicated further changes would need to come through a federal rulemaking process.

Cardona announced the change as the White House faces mounting pressure to pursue wider debt forgiveness.

Democrats including Senate Majority Leader Chuck Schumer, N.Y., and Sen. Elizabeth Warren, Mass., have called on Biden to erase $50,000 in student debt for all borrowers as a way to jumpstart the economy.

Biden has asked the Education and Justice departments to assess the legality of mass debt cancellation. Cardona said Thursday that those conversations are "still under way." Meanwhile, he said, his agency is working to improve other debt forgiveness programs that target specific groups of borrowers.

"It's an effort to show that we are working to improve targeted loan relief and help our borrowers," he said.

Education Secretary Miguel Cardona
Education Secretary Miguel Cardona speaks to press after a visit to P.S. 5 Port Morris, a Bronx elementary school, Tuesday, Aug. 17, 2021 in New York. Brittainy Newman/AP Photo