The U.S. Department of Education announced Thursday that 323,000 borrowers will have student loan debt wiped out. This new regulation is canceling roughly $5.8 billion in debt for borrowers who have a total and permanent disability.

                By                    Josephine Nesbit

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The TPD Discharge program relieves borrowers of student loan debt who are unable to maintain employment due to a physical or psychological impairment, Forbes reported. But disabled student loan borrowers must submit a formal application to have debt forgiven, which can be challenging for those facing serious health issues and some may not even realize that they qualify.

The Education Department has long been criticized for not automatically granting TPD Discharges to disabled student loan borrowers who are receiving disability benefits through Social Security. Forbes added that the Social Security Administration had previously identified hundreds of thousands of disabled student loan borrowers who would qualify for TPD discharges.

“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 on Thursday.

This new regulation allows the Department to provide automatic TPD discharges for borrowers who are identified through administrative data matching. The application barrier was removed in 2019 for student loan borrowers eligible for TPD discharge through matching data with the U.S. Department of Veterans Affairs.

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Borrowers who receive a TPD discharge through the SSA match or the physician’s certification process are also subject to a three-year income monitoring period, the Department of Education said. Borrowers may lose their TPD discharge if their earnings are above a certain threshold or if they do not respond to a request for earnings information.

The Department of Education said that this change will go into effect with the Department’s next quarterly data match with the SSA, which will occur in September. All discharges will be free from federal income tax but there may be some state income tax consequences. Borrowers also have the opportunity to opt out if they wish to do so.

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