Student loan Discharge and Forgiveness for Disability
In the situation that you become completely and permanently disabled, you can qualify for the discharge of your federal student loans or your Teacher Education Assistance for College and Higher Education (TEACH) Grant Service.
To be able to get this discharge for yourself you should first complete and submit the application for total and permanent disability, and along with it submit documentation that meets the requirements of the federal student aid for being considered totally and permanently disabled, to Nelnet the servicer who assists the U.S. Department of Education with the discharge process of the totally and permanently disabled.
The different types of loans that can be relieved through this form of loan discharge are as follows -
William D. Ford Federal Direct Loan program (Direct Loan)
A Federal Family Education Loan program (FFEL)
A Federal Perkins Loan or
To complete and end a TEACH Grant Service Obligation.
Table of Contents
How do I show that I qualify for a TPD discharge?
Your eligibility for the Disability loan discharge can be confirmed by the submission of documentation from any of these three sources -
The U.S. Department of Veterans Affairs (VA)
The Social Security Administration (SSA)
There are specific requirements in each of these documentations that you are required to submit to show that you qualify.
For Veterans affair Documentation
If you're a veteran, you can qualify by providing documentation from the Veteran affairs that shows you have a disability determination because -
You have a service-connected disability that is 100% disabling or
You are totally disabled based entirely on your rating of an individuals unemployability.
For Social Security Administration Documentation
If you are able to prove that you qualify for the Social Security Disability Insurance or Supplemental Security Income, you can qualify for a Disability discharge as long as you provide a Social Security Administration Notice of aware or benefits planning query that shows your next scheduled disability review will be in about 5-7 years or greater from the last date of your Social Security Disability Determination.
While the U.S. Department of education works with the Veteran Affairs and the Social Security Administration to identify and determine those who are eligible for a discharge based on their status with the same. If they receive info from the appropriate corporation stating that you are eligible to qualify for a Disability Discharge, they shall send you a letter notifying you of the same, along with the discharge application.
If you choose to apply for a discharge all that is required for you to do is to complete and submit the application, without having to provide any additional documentation or whatsoever if you qualify for the discharge.
You can also become eligible for discharge when you get a physician to certify on the discharge application that you are not able to engage in any form of substantially effective activity due to a physical or mental impairment which -
Would most probably result in death.
Has lasted for a minimum period of 60 months without any relief in-between or
Is expected to last for a minimum period of 60 months without relief in between.
Substantially effective activity is that activity or level of work that is performed for pay or profit that involves doing significant physical or mental activities or a mixture of both.
The Physician who approves your Discharge application must be a Doctor of Medicine (MD) or a Doctor of Osteopathy/Osteopathic Medicine (DO) who has a license to practice in the United States.
How do I apply for a TPD discharge?
You are required to complete a Discharge application and send it with any other required documentation that proves your qualification for the discharge, to Nelnet, who is the servicer for this type of forgiveness.
The Discharge application applies to all of your federal student loans and TEACH Grant service. Nelnet assists the U.S. Department of Education in administering the Discharge process and also discusses with the borrowers and the TEACH Grant recipients on the behalf of the U.S. Department of Education regarding the Discharge requests.
You will also be able to let Nelnet know that you plan on applying and can request for a Discharge application by phone or email. If you do this, any required payments to be made by you on your federal student loan will stop for a period of 120 days to give you time to submit your application and any documentation that might be required along with it.
To contact Nelnet via email their email is firstname.lastname@example.org and by phone at 1-888-303-7818. They are available from Monday to Friday from 7 am to 2 am Eastern Standard Time (ET) and Saturday from 8 am to 7 pm Eastern Standard Time (ET). For any additional ways to contact them, you should have a look at the Total and permanent disability discharge page on the federal student aid website.
During the time you apply for the Discharge they will check and see if your loans are eligible for forgiveness and finally, they will contact your lender and let them know that your payments must be suspended for a duration of 120 days. During this time you won't be required to make any payments for a duration of 120 days so that you are able to fill out the application and submit it for processing.
If you don't fill and submit the same within this window of 120 days your student loan payments will resume as before.
Once you finish with your application you can mail it with any supporting documentation that you think might be beneficial for your application process.
U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501-7130
Can a representative apply on my behalf and help me throughout the TPD discharge process?
Yes, it is possible for you to assign an individual or an organization to fill, complete and submit your discharge application on behalf of you, and also help you throughout the discharge process.
To assign a representative, you and your representative must fill and make an Applicant Representative Designation form.
Nelnet must get this form and process it before working with the said representative.
You are also required to submit the said form even if your representative already has a power of attorney to let him act on your behalf over any other matter.
What happens after I submit a TPD discharge application?
After receiving your application Nelnet will explain the process in which they will review your application. You shall not be required to make any payments towards your loan during this time while your discharge application is on review.
Once Nelnet receives your application this is reviewed within a time period of 30 days. If your application is approved for disability discharge due to social security administration documentation or certification from a Physician, you will be under a 3 year review period that begins from the date that your discharge is finalized and approved.
But if your approval for discharge is based on a Veterans affair determination, you will not have to take part in the 3 year review period. During the review period, all of your income and any sort of changes in your status will be monitored.
In the instance that you are denied that is if your application for the discharge is declined, your lenders or the one responsible for the TEACH Grant service will be told to continue collecting as per the usual conditions. You will be sent a letter by mail that mentions the denial and the reason behind the rejection of your discharge and this will also include information on what you must do in the instance that you disagree with the decision or have any further queries about the same.
What happens if my TPD discharge request is approved?
After your Discharge request goes through the further action is based on the type of documentation that you had submitted during your application for qualifying for the discharge.
Veterans Affair Documentation
Here if the U.S. Department of education determines that you have become totally and permanently disabled on the basis of the documentation that is submitted from the veteran affairs, Nelnet will send you a notice that says that your loans and/or TEACH grant service has been discharged and notify your loan lenders to return any loan payments received during the time period which is after the date of determination of disability back to the person that made the payments.
Social Security Administration or Physician's certification -
Here if it is determined that you are completely and permanently disabled on the basis of your social security administration documentation or physician's certification,
Nelnet will -
Send you a notice that mentions your loans and/or your TEACH grant Service being discharged.
- Also, instruct your lenders to return any payments which were made after the date that Nelnet received the Social security documentation or the date that the physician certified your discharge application to the person who had made the payments.
Also, send you a notice that you will be subjected to a 3 year post-discharge monitoring time period which beings on the date the discharge was approved.
Explain to you that your obligation to repay these loans or to complete your TEACH grant service can be reinstated if you fail to meet certain criteria at any time through the monitoring time period.
What requirements do I have to meet during the three-year postdischarge monitoring period?
Your requirements to repay your loan or to complete your TEACH grant service can be reinstated if, at any point in time during the 3-year post discharge duration of the monitoring time period if,
You have annual earnings through employment which is greater than the poverty guideline amount for a family consisting of two in your respective state and this is without regard for the actual family size that you have.
A new federal student loan under the Direct Loan program or a new TEACH Grant.
Another disbursement (payment) of a Direct Loan Program or a TEACH Grant which was first disbursed/paid out before your discharge was approved, and the new disbursement has not been returned to the lender or (for a TEACH grant) to the U.S. Department of education within a time period of 120 days of the disbursement date,
A notification from the Social Security Administration that states that you are no longer considered disabled or that your next scheduled disability review will not be in 5 to 7 years from the date of the last Social security administration disability determination.
For the duration of the post-discharge monitoring period, Nelnet will need you to submit documentation that consists of your annual earnings from your employment on the form that is provided by Nelnet. If this form is not submitted with the required information that is your income, the repayment of your loan, and your necessity to complete your TEACH grant service will be reinstated.
The poverty guidelines and the amounts for the same are updated every year by the department of health and human services. Nelnet will send you a notification regarding the same and the current poverty guidelines and update amounts during the years following the post-discharge monitoring time period.
But if you are a veteran that was discharged of his loans through the approval based on your veteran affairs documentation you won't be subject to the post-discharge monitoring time period.
What happens if my obligation to repay my loans or satisfy my TEACH Grant service obligation is reinstated?
As before it will become your responsibility to repay your loans in the manner that is mentioned in the terms of the promissory note that you have signed, or in the manner of keeping with the terms of your TEACH Grant service that you completed.
If you had any loans that you had applied for a discharge, they will be returned to the status they were in before they were discharged.
For example, if you had a loan in default prior to application for discharge, it will be returned to the state it was before, that is, defaulted loan.
If you are reinstated the responsibility to repay your loans or your TEACH Grant that you were required to complete. Nelnet will notify you the reason behind the reinstatement and also give you information regarding the same and also about what can be done in the situation that you have any questions about the reinstatement or if you think the reinstatement was based on invalid or information that was not correct.
What happens if my TPD discharge request is denied?
If the U.S. Department of education determines that you are ineligible for the Discharge, Nelnet will -
Send you a notification of the same.
Explain that you may ask the U.S. Department of education to reevaluate your discharge application provided that you give them new information that may support your eligibility for the discharge in a time period of 12 weeks from the date that you were notified of the denial of your discharge application.
Explain that if you do not request reevaluation of your discharge application within a time frame of 12 months of the date that you are notified of the denial of your discharge application, and you still want to consider asking for a reevaluation from the U.S. Department of education to determine your eligibility, you will need to submit a new discharge application with the new information regarding your disabling condition that was not mentioned with your prior discharge application.
Explain that you are again responsible for the repayment of your loans and that your lender will send you a notification when your first payment becomes due, and
Explain that if you applied for the discharge of a TEACH Grant service, you are again at the responsibility of meeting the terms and conditions for the service.
I received a TPD discharge but want to go back to school. Can I take out more student loans or TEACH Grants?
Yes, but there are some conditions that are required to be met.
If you received a Disability discharge based on a Veterans documentation, Social security administration documentation or a physician's certification, you must
Submit to your school a letter from the physician that states that you are now again able to engage in substantial effective activity, and
Sign off on a statement that is acknowledging that you can't get a Disability discharge on the new loan or the TEACH grant based on a disabling condition that already is existing during the period that you received the new loan or TEACH grant unless it is a condition that deteriorates substantially sometime in the future.
If the discharge was based on a Social Security Administration or a physicians certification and your 3-year post-discharge period is still in effect, you will be required to resume payments on your previous loan which was discharged or acknowledge that you are again under the responsibility to fulfill and meet the requirements of your TEACH grant service.
If my loan is discharged due to TPD, do I have to pay taxes on the discharged loan amount?
Since there was a change n the federal law concerning the taxability of the loan amounts that are discharged due to the Disability discharge, the answer to this will depend on the time period during which you received the discharge.
If you received the discharge of the loan before the date 1st of Jan, 2018, the loan amount can be considered as income for a federal taxation purpose under the Internal Revenue Service (IRS) rules.
If you received a Disability discharge on a loan during the period between the dates 1st of Jan,2018 and 31st of Dec,2025, the discharged loan amount cannot be considered as income for the federal taxation purpose.
For the purpose of determining whether a loan amount discharged due to the disability discharge may be treated as income that is taxable is different based on the nature of your qualification for the discharge.
If you are a veteran who proved that you are already Completely and permanently disabled based on the disability determination by the veteran affairs, you are considered to have received the discharge on the date that the U.S. Department of education approved the discharge.
Social Security Administration and Physician's Certification
If you proved that you are completely and permanently disabled on the basis of documentation from the Social Security Administration or a physician's certification (which means that you are subject to a 3 year post-discharge monitoring period) you will be considered to have received the discharge for federal taxation purposes at the end of the monitoring period.
For Example, if your loan was successfully discharged in the month of July in the year 2017, you would not be considered to have received the discharged until the month of July in the year 2020, that is at the end of the 3 years post-discharge monitoring time period.
Hence, the IRS would not be able to consider the discharged loan amount to be any form of taxable income for the federal taxation purpose.
Any loan amounts that are discharged due to the disability discharge may still be considered income for state tax purpose. If you have received a Disability discharge on a federal student loan, it might be wise to consult with your state tax office or a tax professional before you proceed with filing your state tax return.
Student loan Discharge and Forgiveness for Disability FAQs
1 - How long can you stay on disability?
The time for which one can stay on disability is dependent on the time of benefit that the medical provider has mentioned that the disability is expected to last. The said medical provider can extend the period to the programmed max which can generally be about 52 weeks or 38 weeks for elective coverage.
2 - How do I remove negative items from my credit report before 7 years?
To get something removed off of your credit report
You should start first with a credit dispute letter. but before this, you must make sure that the negative entry on your credit report has no inaccuracies on it.
You could write a goodwill letter.
You can negotiate a "pay for delete"
You could also have a professional remove the negative entry from your credit report.
3 - Will my credit score increase after 7 years?
You should prioritize the delinquent debts. If you have multiple delinquent debts to pay off you might be wondering whether paying them off in any specific order may help you by affecting your score. In terms of credit reporting, negative items will stay on your report for a period of up to 7 years since the date of the original delinquency.
4 - Can you work if you are on permanent disability?
Generally, the SSDI recipients cannot begin any "substantial gainful activity" (SGA) and also continue receiving disability benefits. In a nutshell, doing SGA will prove that you are working and making more money than say $1,220 per month in the year 2019 (or $2,040 in the case you are blind). However, there are exceptions to this rule.
5 - What qualifies as a total and permanent disability?
To qualify as totally and permanently disabled one must not be able to engage in any gainful activity due to a physical or mental condition OR if a qualified physician has confirmed that the condition has or will last for a period of at least one year and or is expected to result in the death of the individual.
6 - How many points do student loans affect credit score?
In accordance with FICO, about 7% of the customers with greater than $50,000 in student loan debt have excellent scores of over 800 points. while the balances on your credit cards can impact your credit score, this is not the case for any installment loans. Instead, its payments are the ones that matter.
7 - Will student loans ever fall off your credit report?
Usually, any defaulted debt should fall off the credit report after a period of about 7.5 years from the date of the first missed payment. A Defaulted federal student loan, older than about 7 years may not appear on your credit report. But since there is no mention of a statute of limitations, collections can and will probably continue.
8 - Does loan forgiveness affect credit score?
In the instance that your loan is in good standing, loan forgiveness will not affect your credit at all. But if you are trying to fix bad credit, you must know this that student loan forgiveness could have a negative impact on your credit score. if you are falling behind on your payments, it must and shall be reported to the major credit bureaus.
9 -How long does disability discharge take?
After the U.S. Department of Education receives your discharge application, they will take action in the following order -
First, they will contact your lenders and have them suspend any collection activity on your loans for up to a period of 120 days. This essentially means that you will not be needed to make any payments on your loans for the same period up to a period of 120 days from the day the application is received by them.
10 - Are student loans forgiven if you become disabled?
In the situation where you have federal student loans and are facing a long term disability, and will most probably be unable to work, you might be eligible for student loan forgiveness through the Total and Permanent Disability Discharge (TPB) that is offered by the U.S. Department of Education through their lender Nelnet.