This decision will wipe out more than USD 5.8 billion in debt
The United States government has announced that it will automatically erase student loan debt for over 300,000 Americans with severe disabilities that leave them unable to earn significant incomes.
According to the education department, the decision will wipe out more than USD 5.8 billion in debt.
“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,” education secretary Miguel Cardona said in a statement.
The Biden administration offers student debt relief for people who are “totally and permanently disabled” and have limited incomes. As per the current rules, those students have to submit documentation of their disability and undergo a three-year monitoring period to prove they're earning little pay.
Tens of thousands of people were excluded from the programme and had their loans reinstated simply because they failed to submit proof of their earnings, however, and critics say the complex rules prevent some from applying.
Starting in September, the education department will start erasing student debt for 323,000 Americans identified in social security records as being permanently disabled.
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. “This is going to be a smooth process for our borrowers,” Cardona said in a call with reporters.
The department also plans to eliminate the programme's three-year monitoring period, which was previously suspended during the pandemic.
"They're not going to have to be applying for it or getting bogged down by paperwork," Cardona added. 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.
In 98% of the cases in which loans were restored, it was because borrowers did not submit paperwork, not because their earnings were too high, the US Government Accountability Office reported.