If you are like one of the millions of people who have student loan debt, there are a variety of student loan forgiveness programs you need to be aware of. One such program is the total and permanent disability discharge program. Under this program, the following types of loans can be discharged:
- William D. Ford Federal Direct Loan
- Federal Family Education Loan
- Federal Perkins Loan
Additionally, if you have entered into a Teacher Education Assistance for College and Higher Education Grant program, your obligation to this program may be canceled under the student loan forgiveness for the disabled program.
For now, let’s take a look at several questions you likely have about the student loan disability discharge program.
What does it mean to have my student loans discharged?
When you qualify for your loans to be discharged under the total and permanent disability discharge program, this means that you will no longer be responsible for paying back the debt. However, because it can take quite some time for the discharge process to be completed, you may be responsible for making monthly payments until you have been approved for loan discharge. It is during this period of time, though, that you may qualify for loan deferment or forbearance. You will want to speak with a loan specialist from the U.S. Department of Education to determine whether or not you need to make payments while going through the loan disability discharge process. Most of the time, once you contact the Department of Education and request an application for disability loan discharge, they will verify that your loans are eligible and they will suspend payment requirements for a period of 120 days.
How can I go about proving to the Department of Education that I am permanently disabled?
There are basically four ways you can prove that you are permanently disabled. It is imperative to understand that proving you are disabled is a requirement for being able to have your loans discharged. If you can’t prove you are disabled, you won’t qualify for the discharge program.
- One way to prove you are disabled is by going through the U.S. Department of Veterans Affairs. You, of course, will need to be a veteran and you will have the VA provide documentation that you are not employable due to a disability that is connected to your military service.
- The other way to prove your disability is by submitting documentation from the Social Security office. For example, you can submit documentation outlining the Social Security Disability benefits you receive or the Supplemental Security Income you receive. You will need to contact the Social Security office and obtain a copy of your Social Security Administration notice of award for the benefits you are receiving. This award notice must state that you have a scheduled disability review within the next five to seven years from the time you last had your benefits determined.
- If you are not a veteran and you are not receiving any type of Social Security benefits for your disability, you can take advantage of another way to prove you are disabled. All you need to do is obtain verification from a physician that you are permanently disabled and you are unable to work.
- Probably the easiest way to qualify for this discharge program is by waiting for a letter in the mail that outlines you already qualify. A move made by former President Obama included the sending out of nearly 400,000 letters to people who were deemed as eligible for the disability discharge program. To take advantage of the program, all you have to do is sign the letter you receive and mail it back to the Department of Education.
How does the disability discharge process work?
As stated before, when you first start the process of filing for loan forgiveness under the disability discharge program, you may be required to make monthly payments. However, once you apply for the discharge program, the Department of Education will contact your loan servicers and any collection activity will be stopped; this means you won’t be responsible for making any payments while the application is being reviewed. Generally, this process takes about three to five months.
- If you are approved, any payments that you made since you became disabled will be reimbursed to you. The Department of Education will contact your loan servicers and inform them that your loans are being discharged.
- If you are denied, you will be sent a letter outlining why you were denied and loan collection processes will be reinstated.
Two Important Things to Understand about Disability Loan Discharge
There are two very important aspects of disability loan discharge that you need to be aware of. For starters, if you are wanting to continue your education, it is suggested that you do not apply for disability loan discharge because you will not be allowed to apply for federal student loans. The only way you will be able to apply for them is if you receive a letter from your physician stating you have recovered from your disability and that you are now able to engage in gainful activity. Furthermore, you will not be able to apply for disability loan discharge again under the same disability. If you were to become disabled due to a new disability, you will be able to have your new loans discharged because of it, but not because of your old disability.
Also important to understand is that you will have to pay taxes on the amount of funds that are discharged. For example, if you have $38,000 discharged under the disability loan discharge program, then the Department of Education will report this to the IRS and you will have to include it as taxable income on your tax return.
Can a representative apply for disability loan discharge for me?
Yes, if you have a representative, guardian or caretaker, this person can apply for total and permanent disability discharge for you. This is very beneficial because it allows you to have someone walk through the process with you. In order to take this route, your representative will need to submit the Applicant Representative Designation form. Please keep in mind that even if you have given someone power of attorney over you, you will still need to have them complete and submit the aforementioned form.
Are there any downsides to disability loan discharge?
We already talked about the downside of having to include the amount of funds discharged as taxable income on your tax return. For some people, the tax bill that you receive as a result can be incredibly enormous. In fact, it may not be feasible for some people who are disabled and have little to no income. There is a solution to this problem, though, and it comes in one of two forms.
First, you can see if you qualify for one of the exclusions set by the IRS, such as:
- Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers
- Certain other education loan repayment or loan forgiveness programs to help provide health services in certain areas.
- Debt canceled in a Title 11 bankruptcy case
Secondly, you can avoid the disability student loan forgiveness program altogether and instead take another route of having your loans forgiven. Take for example that you take advantage of the Income Based Repayment plan, which bases your monthly loan payment on the amount of money you make. Depending on your income, you may qualify for payments as low as $0 a month. After making 25 years worth of payments on this plan, the rest of your loan debt is forgiven. Best of all, the amount forgiven is not considered taxable income.
I’m ready to move forward with the total permanent disability discharge program, so how do I get started?
Once you have decided that you would like to apply for student loan forgiveness for the disabled program, you have three ways to get started. First, you can go online and complete the application. You will be asked an assortment of questions detailing your disability and you will also be asked to submit verification of your disability. Please keep in mind that the entire application process cannot be completed online. Instead, the answers you provide will be used to fill in a portion of the application that you can then print out, have a physician sign and return by mail to the Department of Education.
The next way to start the process is by printing out the application and filling all of it out by hand. With this type of application, you will also need to have it signed by a physician and mail it back in with supporting documentation of your disability.
The third way to get started is by calling or emailing the Department of Education and having them mail or email you a copy of the application. Once again, you will need to answer all questions, have a doctor sign it and return by mail with any supporting documentation.
Where do I mail in the disability loan discharge application?
You actually have four different ways to mail in your application: by postal mail, email, fax or upload it to the Disability Discharge website.
1) Postal Mail address:
U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501-7130
2) Fax number:
3) Email address:
4) Website address:
What if I have multiple loans from different federal lenders?
One of the biggest concerns that student loan borrowers have is that if they have multiple loans through different lenders, they think they need to apply for disability discharge for each loan. This simply isn’t the case, though. You only have to submit one application for all of your federal loans. All qualifying loans will automatically be included under your discharge if you are approved.
If I am already receiving Social Security Disability benefits, does this mean I qualify for disability loan discharge?
Many people are mistaken and believe that if they receive Social Security Disability benefits, that this automatically qualifies them for disability loan discharge. Unfortunately, though, this is not always the case. Each case is reviewed on an individual basis.
Can only certain types of doctors certify my disability?
Yes, there are only certain types of doctors that can certify your disability and deem you as eligible for consideration for disability loan discharge. These doctors must have licensure as:
- A doctor of medicine (M.D.)
- A doctor of osteopathy (D.O.)
Also, these doctors must be licensed to practice in any of the following locations:
- The United States
- Puerto Rico
- the Virgin Islands
- American Samoa
- The Commonwealth of the Northern Mariana Islands
- The Republic of the Marshall Islands
- The Federated States of Micronesia and Palau
My disability loan discharge application was denied. Is there anything I can do?
Yes, if your application was denied, you can always appeal the determination. To do this, you will need to provide any additional information that you believe will affect the determination of your application. This information must be submitted within a year of the date that you were denied; this way you don’t have to fill out another total and permanent disability discharge application. If you wait longer than a year, you will have to fill out another application and submit it along with your additional supporting information.
Am I allowed to work at all if I receive loan discharge under the disability loan discharge program?
Yes, you are allowed to work, but your total and permanent disability status will need to remain the same. Your case will be reviewed three years after you are approved for loan discharge (unless you received approval by submitting disability verification from the VA). During this three year period of time, you are limited in regards to how much money you can earn. For example, your “annual earnings cannot exceed the Poverty Guidelines amount for a family of two in your state.”
There are many factors that will impact whether or not you qualify for loan discharge under the total and permanent disability discharge program. It is highly recommended that you contact the Department of Education and speak with a loan discharge specialist who can walk you through the entire process.