Biden to cancel $5.8bn in student debt for more than 323,000 disabled borrowers

More than 323,000 student loan borrowers with disabilities will have their debts automatically discharged, cancelling more than $5.8bn in student debt, according to the US Department of Education.

Joe Biden’s administration will cancel that federally held debt through the Total and Permanent Disability discharge programme, which grants relief to borrowers who are unable to work due to physical or psychological disabilities.

The move follows years of pressure and organising over the course of several administrations to grant relief to eligible borrowers as they are entitled under the law, without burdensome application processes and delays.

Advocates have long argued that the Education Department has authority to discharge loans for people receiving disability benefits through the Social Security Administration, which has previously said that it already identified thousands of eligible borrowers to the department.

Beginning in September, the Education Department will match borrowers with SSA data and should be able to discharge their debt by the end of 2021, according to the department said. Borrowers will not face federal income taxes on cancelled amounts, though they could be liable to state taxes.

“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,” Education Secretary Miguel Cardona said on Thursday.

The move follows incremental efforts from the administration to navigate the student debt crisis, which has ballooned to 45 million Americans holding more than $1.8 trillion in debt, which surged within the last decade as private university enrolment grew and federal and state governments made steep cuts to higher-education funding against growing wealth inequality.

Most of that debt – $1.5 trillion – is in federal loans.

Mr Biden pledged to cancel up to $10,000 in federal loan debt before he entered the White House, adding that it “should be done immediately” upon taking office.

The president has extended the coronavirus pandemic pause on federal student loan payments through September, and Secretary Cardona has rolled back a policy implemented by his predecessor Betsy DeVos to provide full debt relief for borrowers defrauded by for-profit schools.

During his campaign, Mr Biden proposed a debt relief plan that would cancel up to $10,000 of undergraduate or graduate student loan debt for every year of national or community service, up to five years.

He also modelled a plan from Senator Bernie Sanders and US Rep Pramila Jayapal to cancel federal student loan debt for borrowers from public colleges and universities earning up to $125,000 per year, including students from private Historically Black Colleges and Universities, in an effort to close the racial wealth gap.

The education platform outlined in his American Families Plan would provide up to two years of tuition-free community college and universal preschool, but the plan does not include the measures outlined during his campaign.

As progressive lawmakers weigh congressional action, administration officials are reportedly mulling whether the president has authority – as many debt cancellation advocates have argued – to unilaterally cancel debt through executive action.