(AP) – The US Department of Education cancels student debt for more than 40,000 Americans who had previously received loan forgiveness due to a disability, but then saw their debt reinstated after failing to submit certain documents, the agency said on Monday.
The action targets a loan cancellation program that aims to help people with disabilities, but which critics say has overly onerous rules. After getting a loan forgiveness, borrowers are required to present documents proving their income for three years. If their income exceeds certain thresholds – or if they do not present documents – they are again forced to pay their loans.
Recognizing the challenges of the program, the Education Department said it will relax the rules during the coronavirus pandemic and consider other changes to reporting requirements in the future.
Until the federal government declares the pandemic over, more than 190,000 borrowers who are now in the three-year watch period will not be required to show proof of their income, the agency said. Another 41,000 people whose debt was written off due to paperwork issues will once again get loan forgiveness, for a combined $ 1.3 billion.
Education Secretary Miguel Cardona said borrowers with disabilities should not “put their health on the line” to submit income information.
The measure was a disappointment for defenders who called for a complete overhaul of the program. Student Defense, a Washington legal group, said the action helps a small fraction of borrowers eligible for the program. The group urged Biden to automatically erase loans for all eligible borrowers and remove the watch period permanently.
Alex Elson, senior lawyer for the group, said the new measure “is not a victory for the students”.
“There are approximately 400,000 disabled borrowers that the Social Security Administration has already determined to be legally due for debt relief,” he said. “The Department of Education knows exactly who they are but chooses not to do anything for them.”
A senior ministry official said the agency was considering permanent changes to the program, but would have to go through a federal rule-making process that takes months of negotiation.
The program was created to help people “totally and permanently disabled” and unable to generate significant income.
Borrowers are eligible if they can present documents proving a mental or physical disability that has lasted for at least five years or is expected to last that long. During the follow-up period, their income should not exceed the poverty line of a family of two in their state.
The program came under intense scrutiny in 2016 after a federal watchdog discovered that income tax rules were a major hurdle for borrowers. The United States Government Accountability Office found that 98% of the cases where loans were reinstated were because borrowers failed to submit the correct documents, not because they were earning too much.
In 2019, the Trump administration decided to grant automatic loan discharges to veterans who become eligible for the program. Those who have not served in the military, however, should apply for relief. Advocates estimate that nearly 70% of eligible borrowers have not received a loan forgiveness and have student debt estimated at $ 14 billion.
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