Do I Qualify for Student Loan Forgiveness? Update on Biden Student Loan Cancellation 2021

The U.S. Department of Education announced on Thursday it will forgive more than $5.8 billion in student loans, but to qualify for forgiveness a person must have a total and permanent disability.

Federal student loan payments and interest accumulation will remain on pause until the end of January, and legislators have been pushing for broad student loan cancellation in light of the coronavirus pandemic. Thursday's announcement is unlikely to satisfy those hoping for universal cancellation, as it's a relatively targeted measure, but it's expected to affect 323,000 borrowers, according to the Education Department.

To be considered totally and permanently disabled, a person must be unable to work because of injury. Also, the Social Security Administration will pay out benefits for total disability only if a person cannot adjust to other work because of a medical condition that is expected to last at least one year or result in death.

The Education Department is going to partner with the Social Security Administration to determine who qualifies for forgiveness. It will begin with a September quarterly match and removes the need for borrowers to fill out an application to receive relief. In 2019, that requirement was removed for borrowers the Department of Veterans Affairs deemed eligible for total and permanent disability student loan discharge.

do i qualify for student loan forgiveness
The Biden administration is forgiving student loans for about 332,000 people who have a permanent and total disability. Above, the U.S. Department of Education building in Washington, D.C. Alastair Pike/AFP/Getty Images

"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," Secretary of Education Miguel Cardona said in a statement. "This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support."

Only about half of borrowers identified for total and permanent disability loan discharge through the Social Security Administration's data match have received the discharge, according to the Education Department. That means thousands of people were still repaying loans that should have been forgiven or may have defaulted on their loans.

After the match is done in September, borrowers will receive notice of their approval, and all discharges are expected to occur by the end of the year.

The student loan forgiveness won't be subject to federal taxation but could be taxed as income at the state level, so the Education Department advises borrowers that they can opt out of the discharge if they want to do so.

Including the 323,000 borrowers who are expected to benefit from Thursday's announcement, the Education Department said 455,000 borrowers have had student loan discharges approved since Biden took office. Along with the total and permanent disability requirement, the discharges apply only to federal student loans, not private loans.