Adjusting to life with an injury or chronic illness is undoubtedly a challenge, especially if it has an impact on your ability to work and earn a living. This stress is one of the reasons that student loan borrowers with disabilities can fall behind on payments and go into delinquency and default — even though there are options available to help them avoid these consequences.
If you are temporarily unable to work because of an injury or illness and struggle to afford your monthly student loan payments as a result, reach out to your student loan servicer right away to discuss options that may be available to lower your monthly payment amount or pause your payments. The federal student loan program offers several repayment plans for all borrowers who are struggling to repay, including options that could lower your monthly payment amount to zero if your income is low enough.
However, if your medical situation is permanent, you may qualify to have all or some of your federal student loans canceled through what is known as a total and permanent disability, or TPD, discharge. TPD discharge can provide relief from having to pay back direct loans, some Federal Family Education Loans, Perkins loans and TEACH Grant service obligations. Many private student loans provide a similar option.
Many people who qualify to receive TPD discharge of federal student loans will have their loans discharged automatically. If you believe that you qualify and you have not received an automatic discharge, you can attempt to have your loans discharged by certifying that you are unable to work or earn an income due to an injury or illness from which you are not expected to improve or recover.
How to Qualify for TPD Discharge
To qualify for a TPD discharge on a federal student loan, you must meet one of the following criteria:
— Certification by the U.S. Department of Veterans Affairs, or VA, determining that you are totally unemployable either due to a service-connected disability or based on an individual unemployability rating.
— Eligibility for Social Security Disability Insurance or Supplemental Security Income benefits, with a review date of no less than five to seven years from the date of your most recent Social Security Administration, or SSA, disability determination.
— Certification from a physician that you are totally and permanently disabled, which means you are “unable to engage in any substantial gainful activity” because of a mental or physical impairment that can be expected to result in death; has lasted continuously for at least 60 months; or can be expected to last continuously for at least 60 months.
Automatic TPD Discharge
Both the VA and the SSA use a data matching system to help the U.S. Department of Education identify borrowers who qualify for a TPD discharge based on their status. The Education Department is alerted when a borrower qualifies for this discharge and can automatically forgive student loans and/or the TEACH Grant service obligation, which means that most borrowers who qualify will not have to apply for a TPD discharge.
The automatic discharge process is fairly new, and until somewhat recently all borrowers were required to submit an application for the discharge even when they had been identified using the data matching system. Because failure to apply prevented many borrowers from receiving relief, the department began to automatically forgive the loans of federal student loan borrowers who were identified by the VA in 2019 and removed the application requirement. This policy was recently expanded to include borrowers identified by the SSA this year.
Borrowers who are identified for an automatic discharge will receive a notice of approval for a discharge and are given the opportunity to opt out, but do not have to do anything if they wish to have their loans forgiven.
How to Apply for TPD Discharge
To apply for a TPD discharge, submit an application with requested information to your loan holder. For most federal student loans, your loan holder is the Department of Education, but for private student loans or older FFEL program loans you should check with the lender for more information about the process and eligibility requirements.
You begin the application online at DisabilityDischarge.com and then must download it, gather the requested materials such as your doctor’s verification, and mail it in. Once your application is received, your loan holder will make a determination based on your situation.
You should also let Nelnet, a student loan servicer that assists the Department of Education in administering the TPD discharge process, know that you want to apply. That way, any required federal student loan payments will stop for 120 days to give you time to submit the application. Once Nelnet receives the application, you won’t be required to make payments on your loans while it is being reviewed.
Importantly, a representative can complete and submit a TPD discharge application on a disabled borrower’s behalf after completing an Applicant Representative Designation form, which is also available at DisabilityDischarge.com.
If your request for TPD discharge is denied, you may be able to ask for a reevaluation of the application. This would involve providing new supporting information about your eligibility for discharge within 12 months of the denial notification date.
Other TPD Discharge Considerations
There are a few additional things that you should consider or know about before you apply for total and permanent disability discharge. You aren’t required to pay federal income taxes on the amount of federal student loans discharged if you received the discharge on Jan. 1, 2018, or after, up until Dec. 31, 2025, but the discharge amount may be considered taxable income in your state.
For private student loans, your discharge amount may be treated as taxable income. You may want to consider consulting a tax professional to better understand your tax obligation if you receive a student loan discharge based on disability.
In addition, student loan borrowers who have been granted a TPD discharge through the physician’s certification process or SSA match normally are subject to income monitoring for a three-year period, during which the lender or Department of Education may check in with you to be sure you still meet the criteria for the discharge and request earnings information. This earnings documentation requirement during the post-discharge monitoring period was waived in March of this year for federal student loans for the remainder of the pandemic relief period.
When the relief period ends, the department will stop sending out automatic requests for earnings information , and has noted that 98% of reinstated TPD discharges in the past were simply the result of borrowers not submitting requested information.
Additionally, the department recently announced that it “will be returning borrowers’ loans and TEACH grants back to discharge status if they were reinstated any time on or after March 13, 2020, due to a borrower’s failure to certify annual earnings.” The department also has announced plans to propose eliminating the monitoring period entirely.
There are several scenarios where the obligation to repay your discharged student loans could be reinstated, such as if you receive a new federal direct loan or TEACH Grant, or if you receive annual job pay over the poverty guideline amount for a family of two in your state.
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Update 09/22/21: This article has been updated with new information.