The Department of Education (ED) announced plans to cancel around $ 1.3 billion in student loan debt for 41,000 borrowers who had previously qualified for graduation but were unable to receive it due to incomplete paperwork, and waived certain procedures for another 190,000 borrowers.
“Borrowers with total and permanent disabilities should focus on their well-being, not put health on the line to provide income information during the COVID-19 emergency,” Education Secretary Miguel Cardona said in a statement. “To waive these requirements will ensure that no borrowers who are completely and permanently disabled risk having to repay the loans simply because they could not send papers.”
Some borrowers will now see that their cancellations take effect without the need to submit additional income documentation during the pandemic. If they had paid between March 2020 and now, they will also get their money back. And around 190,000 borrowers who are in the three-year monitoring period do not have to submit income documents in the future, and waive this requirement, to qualify for emissions.
Some experts in the room noted that the policy was initially misled.
“This is really a small step and one that honestly would not even have been necessary,” Persis Yu at the National Consumer Law Center told Yahoo Finance. “It’s quite outrageous that the department initially allowed these loans to be reinstated during the pandemic. … so while it’s important that they do this, there’s not much reason to celebrate.”
In order for a borrower to qualify for a total and permanent discharge of disability in accordance with applicable law, they must submit an application form and then provide documentation of their income for three years for assessment. If they miss the paperwork during this three-year monitoring period, their debt will be reinstated.
According to a report, around 400,000 borrowers across the country in 2019 qualified for a total and permanent disability release because. But since the process is selected and they have to apply for ED to get cancellation, Yu noted, they have missed it.
“We are talking by definition about a population with disabilities, and some of these disabilities are cognitive, such as … traumatic brain injury,” Bethany Lilly, co-author of the report and senior director of revenue policy at The Arc, told Yahoo Finance. “There is a section of this population that is not going to be very good on paper.”
Former President Donald Trump signed an executive order in 2019 urging the ED to notify more than 25,000 veterans who qualify for total and permanent disqualification of their eligibility for cancellation. More importantly, Yu noted, the order also automated the process and eliminated a three-year waiting period for these borrowers.
ED said they were aware of these two critical solutions and wanted to expand aid policy.
“These are things that are under consideration, but they can not be done right away, … [they] take some time, “explained an official.” We continue with what more we can do here … [but] total and permanent disability, like many of our programs, does not work as efficiently as it should, and we continue to see what we can do about it. “
Yu stressed that emergency relief policies that omit so many relevant borrowers are an indication of “failed targeted relief. When you create unnecessary bureaucracy around getting relief for borrowers, borrowers who need this relief will not get it. … this is why we need widespread student debt reporting. “
House Education and Work Committee Leader Bobby Scott (D-VA), who supports recent ED initiatives to help student borrowers, said the announcement “is another example of how the Biden administration is using its authority to improve student life. Borrowers and their families “Scott added that he hoped progress would continue, and the ED” will continue to provide rapid loan relief to eligible borrowers who were largely ignored by the previous administration. “
Aarthi is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.
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