Paying off student loans is difficult, and it can be even more difficult if you have a disability. However, there are some loan discharge programs designed to help people with disabilities get loan forgiveness. If you have a total and permanent disability, you may qualify for a total and permanent discharge (TPD) program.
What Conditions Qualify for TPD?
There are three classifications of disability: temporary, permanent, and total. A temporary disability is a short-term condition that makes it difficult or impossible for a person to complete the necessary activities of their work, but which will eventually resolve. It is usually covered by workman’s comp or temporary disability insurance.
Permanent disability, on the other hand, is an impairment, mild or severe, which is expected to last for the rest of the person’s natural life.
Total disability is defined by a condition which makes it impossible for the person to support themselves with typical employment. Total disability may be permanent, as in the case with significant sight or hearing loss, amputation, paralysis, long-term learning or mental health disorders, or irreversible brain damage, to name a few. Or, it can be temporary, such as broken limbs or severe short-term illness.
In order to qualify for total and permanent discharge programs, you must be diagnosed with a total and permanent disability.
What Kinds of Loans Qualify? The loans that can be discharged on the basis of a disability include federal education loans, including those granted by:
- The Federal Perkins Loan Program
- The Federal Family Education Loan Program
- The William D. Ford Federal Direct Loan Program (often referred to as just a federal direct loan)
Additionally, recipients of the TEACH grant may be able to discharge their service requirements associated with the grant.
How Do I Apply for a Disability Discharge?
There are three ways by which to secure a disability discharge for your loans. You can have a medical doctor diagnose you with a total and permanent disability, you can qualify as a disabled veteran, or you can qualify as a recipient of Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).
Disability discharges are processed by the US Department of Education through their partner Nelnet, which processes the applications and contacts loan servicers to secure the discharge.
SSDI and SSI. If you qualify for Social Security Disability Insurance or Supplemental Security Income due to a total and permanent disability, you may also qualify for the TPD program for loan discharge. Nelnet regularly communicates with the Social Security Administration regarding potential applicants.
If the SSA believes you would qualify, they will send a letter to the Department of Education, who in turn will notify you of your qualification. If you receive such a notice and do not respond by the date provided, your loan discharge will automatically be processed. If you do not want the loans discharged at that time, you will need to reject the discharge before the deadline.
Veteran. If you are a US veteran, who is disabled as a result of your service, you may also automatically qualify for the TPD program. The US Department of Veterans Affairs (VA) also regularly communicates with Nelnet to provide information about potential applicants. As with SSDI, Nelnet will notify you of your qualification, with further instructions about accepting or denying the discharge.
Doctor Certification. If you are not a veteran, and have not applied or do not qualify for SSDI, you can still apply for a disability discharge through a medical diagnosis by a licensed physician in the United States. In order to do so, you must have the doctor submit supplementary documentation to Nelnet.
For a disability to qualify as total and permanent, the doctor must certify that your illness or impairment either has persisted for more than 60 months, is expected to persist for more than 60 months, or will ultimately result in death. The documentation required may vary depending on the diagnosis, so it may be helpful to contact Nelnet to find out what specific paperwork is needed.
What Happens When You Apply?
If you intend to apply for a total and permanent disability discharge for your loans, the first thing you should do is contact Nelnet. They may be able to tell you if you are already qualified through the VA or SSDI, and if not, they can help you figure out what paperwork you will need to get from your doctor to apply.
Once you let Nelnet know you will be applying, they will contact your loan servicers to put a temporary hold on your loans for up to 120 days. This should provide sufficient time to complete and process the application. Once your application is approved or denied, either the loans will be discharged, or collection will begin again.
If you are unable to apply on your own, or would like another person’s help, you can designate a representative to complete your application and communicate with Nelnet. To do so, you must complete an Applicant Representative Designation form, which can be found on Nelnet’s TPD program website.
Why Would I not Want a Disability Discharge?
If you receive a discharge of your loans for total and permanent disability, you will not be eligible for federal student loans or grants again in the future. A disability discharge may not be in your best interest if you intend to return to school and need more loans to do so.
Although it is possible to receive additional loan funds after a disability discharge, in order to do so, you must obtain proof that you are no longer disabled. You must also certify that you understand that any loans you take out cannot be discharged on the basis of disability in the future, unless you again become totally and permanently disabled.
You may choose not to seek a disability discharge because forgiven loans can be taxed as income, sometimes resulting in a substantially higher tax burden that may be equally, or even more, difficult to pay off.
There are also conditions that can cause your loans to be reinstated after discharge. Once a discharge is approved, you must undergo a monitoring period of three years, during which your loans may be reinstated if:
- You earn more than your state’s poverty guidelines for a family of two, no matter the actual size of your family
- You take out additional federal loans or receive funds from a loan taken out before your discharge and do not return them
- You are determined to be no longer totally and permanently disabled
If you think these conditions apply to you, or may apply to you in the near future, you may not wish to discharge your loans.