Democrats introduce bill to cancel private student loans for borrowers and co-signers due to disability


House Democrats today introduced a bill that would allow borrowers with disabilities to fully pay off their private student loans.

The bill, the Private Loan Disability Discharge Act (HR 2498), would require private student loan lenders to release the loan balance for both the student loan borrower and any co-signer if the borrower becomes totally and permanently invalid.

Currently, there is a federal Total and Permanent Disability (TPD) release program that allows borrowers to pay off their federal student loans on the basis of a medical disability. But there is no such program for private student loan borrowers. Some private lenders offer disability release under certain circumstances, but these programs are discretionary and the availability of these private student loan disability release options is patchy at best. In addition, even when these programs are offered and a discharge is granted, the co-signer may still be responsible for the repayment of the student loan, even if the borrower is released from his obligation.

“A voter brought this issue to our attention … her daughter had become totally disabled and she had her private student loan balance remaining as a co-signer,” said Representative Madeleine Dean (PA-04), who sponsored the bill, in a statement. “The loan company said it would cancel the loan for the borrower, but not the co-signer – so we wrote HR 2498 to combat this unfair practice and to ensure that student loan borrowers are protected in the case. of these terrible circumstances. “

The new bill comes amid growing attention to freeing up student loans for disabled student loan borrowers. Student loan advocacy organizations yesterday filed an official petition calling on the Biden administration to grant automatic student loan forgiveness to hundreds of thousands of borrowers with disabilities who may be eligible for a federal student loan discharge under the total and permanent disability discharge (TPD). program, but may not even realize that they qualify. The organizations urged the US Department of Education to automatically cancel federal student loans from these borrowers, without requiring them to make an affirmative application, given that the Social Security Administration has already shared enough information with department officials. regarding eligible disabled borrowers.

Last month, the Biden administration announced that it would reverse the administrative requirements of the federal TPD discharge program by temporarily waiving borrower obligations during the so-called post-discharge monitoring period, which lasts for three years. To keep their canceled student loans in discharged status, most PDT borrowers must submit ongoing annual documents after release approval to certify their disability status and employment income (if applicable). Failure to respond may result in waiver of discharge and reinstatement of student loans. The vast majority of student loan disability releases that are canceled are due to the inability of a borrower with a disability to respond to monitoring requests and submit required documents. The Biden administration’s waiver of the TPD post-discharge monitoring requirement will be retroactive to March 2020, when the COVID-19 pandemic emergency was first declared, and will continue until the end of the emergency.

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