The U.S. Department of Education announced a major step in removing barriers in the path of people with disabilities who pursue an education and career goals. The Department’s new regulation will provide important relief to more than 323,000 people with disabilities who have outstanding student loans. These borrowers will receive more than $5.8 billion in automatic student loan forgiveness, without having to jump through bureaucratic barriers to access loan forgiveness. The new policy removes these barriers by automating the process and eliminating burdensome paperwork.
"Today's action removes a major barrier that prevented far too many borrowers with disabilities from receiving the total and permanent disability discharges they are entitled to under the law," U.S. Secretary of Education Miguel Cardona said. "From day one, I've stressed that the Department of Education is a service agency. We serve students, educators, and families across the country to ensure that educational opportunity is available to all. 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. This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support."
This change will go into effect with the Department's next quarterly data match with SSA, which will occur in September. Borrowers will receive notices of their approval for a discharge in the weeks after the match and the Department expects that all discharges will occur by the end of the year. Borrowers who wish to opt out of their discharge for any reason will have an opportunity to do so. All discharges will be free from federal income taxation but there may be some state income tax consequences. Borrowers will be and are encouraged to consult their state's tax office to understand whether this discharge will be considered income under their state's tax code.
“We are encouraged that The Department of Education is implementing recommendations made by The Arc and other advocates to better serve people with disabilities and get rid of these obstacles to financial stability and achieving goals. This is also a huge step toward making sure that people with disabilities do not risk losing their Social Security benefits if they cannot navigate the bureaucratic discharge process. This change helps ensure that government systems work for people with disabilities,” said Peter Berns, Chief Executive Officer of The Arc of the U.S.
You may read the U.S. Department of Education release in its entirety here.
Sources: U.S. Department of Education and The ARC of the United States