Education Department to eliminate $5.8 billion in student loans for disabled borrowers

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The action will affect over 300,000 borrowers

The U.S. Education Department has announced that it will begin automatically canceling the student loans of more 323,000 severely disabled borrowers. 

In a statement on Thursday, the agency said it will start discharging the debt of borrowers who are unable to maintain gainful employment due to a permanent physical or psychological medical impairment. The action will take effect starting in September.

"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," said U.S. Secretary of Education Miguel Cardona. "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.” 

Burdensome rules

The action is being carried out through the Total and Permanent Disability (TPD) discharge program. While the move is intended to help many struggling borrowers, critics have argued that potential beneficiaries may face challenges in submitting a formal application. Some may even be unaware that they qualify. 

“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,” Cardona said. “This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support."

More than $5.8 billion in debt will be wiped out as a result of the move, the Education Department said. The changes introduced today will go into effect starting in September, and all of the loans are expected to be discharged by the end of the year.

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