The Federal government and Education Department provide many opportunities to borrowers to eliminate their debt burdens. Such student aid programs help borrowers in public service or debtors who face unfair treatment from schools. Besides, discharge programs exist to forgive borrowers’ debts when their schools close or in case of disability and death. This guide focuses on student loan forgiveness for disability. The official name for the program is Total and Permanent Disability Discharge. The program is mainly available for federal borrowers. Only a few private lenders might provide this option to eliminate the debt concerns of private student loan borrowers.
You can find detailed information on the eligibility and application process in this guide. However, you can also contact our debt specialists to get more information and direct your questions.
1. What is Student Loan Forgiveness for Disability?
This debt discharge program aims to eliminate the debt of total and permanently disabled borrowers and help them get out of their debt burden. The official name of student loan forgiveness for disability is Total and Permanent Disability Discharge.
This program involves Direct, FFEL, and Perkins loans, which means most federal loans qualify for discharge. Meanwhile, only a few private student loan lenders provide this opportunity. Hence, private loan borrowers can have a hard time eliminating their debt due to disability.
As the student loan discharge is based on disability, it is necessary to prove such conditions to get the student loan forgiveness for disabled individuals. Once the borrower submits required documents, the Education Department reviews the application and decides if you qualify for the program.
The application process usually requires proof of disability and completion of the disability discharge application form. Depending on how you prove the disability, you might attach supporting documents or let your physician fill the designated section for disability proof within the application form.
2. How Do I Prove Disability?
As mentioned, one of the most essential eligibility conditions is proving that the borrower is totally and permanently disabled. There exist three ways of getting disability documents:
- Through Veteran Affairs
- Social Security Administration
- and a Physician
Veteran Affairs provides documentation for disabled people. Specifically, this method is the best for student loan forgiveness for disabled veterans. The Veteran Affairs usually inform the Nelnet, the loan servicer for student loan forgiveness for disability, about the borrowers who qualify for the program.
However, if you do not get informed about your qualification, you can get a document from VA and fill the application form. You need to submit the VA documentation together with the application form that indicates you are total and permanently disabled. Keep in mind that the documentation should have an effective date on it.
In some cases, the borrower does not even need to apply for the forgiveness program. The VA informs the Nelnet, and then the loan servicer contacts the borrower that he/she qualifies for a forgiveness opportunity. The disability should be service-connected, 100% disabling that restricts the borrower from employment.
If you receive a letter that you qualify for student loan forgiveness for disability, you will notice a date on it. If you do not want the discharge option, you should inform the Nelnet by that date. Otherwise, Nelnet will inform your loan servicer to eliminate the student loan debt if you do not take any action. In such cases, there is no need to fill application forms except signing.
Social Security Administration
The requirements for Social Security Administration are similar, with a few differences. If you receive Social Security Disability Insurance or Supplemental Security Income, you can qualify for student loan forgiveness for disability. However, keep in mind that your next scheduled review should be 5-7 years from your last disability determination date.
Like Veteran Affairs documentation, Social Security Administration also informs Nelnet if a borrower qualifies to discharge the case. In such a case, you will be informed about qualification, and you will not need to submit the documentation proving the disability. However, you still need to apply for discharge, and Nelnet will explain how to continue applying for student loan elimination.
Again, if your qualification is not automatically determined, you can apply by yourself by submitting your SSA documentation for student loan forgiveness for disability.
Another way to prove the disability is through getting certification from a physician. The physician is defined as a doctor of medicine or osteopathy. The doctor should have a license to work in the U.S. Conditions are a little different for certification. A certificate should indicate that:
- Disability can result in death
- It lasted at least 60 months, or it will last at least 60 months
- Disability restricts the borrower from gainful activity- employment
Each option has its requirements in the application process. We will explain them in the following sections.
3. Whom Should I Contact for Disability Discharge?
If you want to get disability discharge, the first thing to do is contacting the student loan forgiveness for the disability servicer. As mentioned, Nelnet is the servicer for this program. Hence, you can contact Nelnet by phone or email.
In such a case, Nelnet will explain the steps for application. Nelnet will also contact the loan holder and notify them about the debt non-collection period. The loan holder will not require any payment for a maximum of 120 days so that you can finalize your application.
4. Can a Representative Apply on Behalf of Me?
Understandably, disability can be a barrier to application for some borrowers. Hence, it is possible to designate a representative to deal with the application process. The representative can fill the application and submit it on behalf of the borrower. However, the borrower should fill a form first to indicate that he/she assigns a representative.
5. What Happens in Post-Application?
Once you apply, Nelnet informs the lender to stop debt collection. If your loan is in default and payments are collected through wage garnishment, this process might continue. Next, Nelnet will review the application and any additional documents.
When Nelnet ensures that the application is proper, it will forward the request to the Education Department. It is the Education Department that makes the final decision. Nelnet only assists the Education Department.
Application through VA
As mentioned, you have three ways to provide disability proof. Depending on which option you choose, the application and post-application process can change. If you want to benefit from this student loan forgiveness for disabled veterans, you can get a document from Veteran Affairs. The VA document should show that the borrower has a service-related disability that totally restricts engaging in employment.
If you utilize this document, you should fill only the sections from one to three in your application form. Next, send the application form together with VA documentation to the Education Department.
It is possible that you will be contacted about the automatic discharge process based on a document received from VA. in such case, you do not need to fill and submit an application form, except signing. If you do not reject the discharge option, your debt will be eliminated automatically.
Once you submit the application, the Education Department will review and determine if you qualify for the discharge. If you get approval, the Nelnet will notify you and the lender that the debt will be discharged. Besides, the borrower will receive any payment made after the disability date. Hence, the disability date is determined as the effective date on the VA documentation.
If your application is rejected, Nelnet will notify you. In that case, they will also notify the lender to resume the debt payment collection process. As a result, you will be required to make payments.
Keep in mind that the reason for the rejection will appear in the notice you receive. If you do not agree with the denial, you can request re-evaluation by getting additional documents from Veteran Affairs.
Application through SSA
Again, the Education Department will review the documents received from SSA or from the borrower and decide on student loan forgiveness for disability requests.
Under the rules for SSA, your document will be suitable if you provide SSA notice for the SSDI award or SSI benefit. This award should ensure that the borrower’s next disability review decision will be within 5-7 years. It is possible that the award will not indicate the next review date. In such cases, you can contact the SSA office and request a Benefits Planning Query.
Once the document is ready, you need to fill the application form for the student loan forgiveness for disabled individuals – sections 1,2, and 3. Submit the application form together with SSA notice of award or Benefit Planning Query to the Education Department. Keep in mind that if you apply through SSA, there is no need to ask a Physician to fill section 4. Additionally, if SSA provides your document directly to Nelnet, you do not need to submit an application.
If your application is successful, you and the lender will get a notice. The lender will stop debt collection totally and will return any payment made after the disability date. Disability date is the date indicated on the SSA notice or SSDI, SSI benefit.
Different from documentation through Veteran Affairs, this time, you will be subject to a 3-year monitoring period after the approval date. We will explain the details of the 3-year monitoring period in the following sections. Keep in mind that you will be required to repay the debt again if you lose eligibility to student loan forgiveness for a disability during these three years.
The rejection case is similar to the VA process explained above.
Application through Physician Certification
Another way to prove a disability that restricts employment activity is by getting a certificate from a Physician. In this case, you need to fill the application- sections 1,2 and 3. Then you need to request a physician to fill the fourth section. Once the application form is complete, you have to send it to the Education Department within 90 days after the sign.
The approval and rejection cases are similar to the application through SSA. Again, you will be subject to a 3-year monitoring period if you use a physician’s certificate for this student loan forgiveness for disability. In case you get better and gain employment activity in this monitoring period, you can be required to repay the debt, and your discharge will be eliminated.
6. Can I Get a New Loan after the Discharge?
Getting a new Direct, Perkins loan or a TEACH grant is possible after receiving student loan forgiveness for disability. However, you need to satisfy two conditions. First, you should get a document from a physician stating that you can engage in employment to gain money. Second, you should acknowledge that you take full responsibility for the repayment plan, and you cannot request another disability discharge for the existing illness or injury.
Besides, suppose you previously received student loan forgiveness for disability through SSA or Physician’s certificate, and you are in a three-year monitoring period. In that case, you will lose your prior discharge status. It means if you get a new loan, you will be required to repay the previous debt.
7. Where can I Find the Discharge Application Form?
As mentioned, the application process requires a completed form and supporting documents. There exist three ways to get an application form. First, you can apply online. You will fill some part of the application online and then download it as a PDF file. Print this document and fill the Section 3. Next, attach supporting documents proving disability and mail the necessary documents to Nelnet.
Another way to fill an application is by downloading and printing a blank application form. In such a case, you will fill the paper form from sections one to three. Next, attach the required documents or ask your physician to fill the section four. Finally, you can mail the application and, if required, the supporting documents to Nelnet.
The third option to fill the form is by requesting the application form by phone or email. You can contact Nelnet and ask them to send you a request form for this student loan forgiveness for disability. After you get the document, you should fill the section one to three and attach supporting documents, or ask your physician to fill in section four.
8. What is a Three-Year Monitoring Period?
As mentioned before, borrowers who use Physician Certification or SSA documentation to apply for student loan forgiveness for disability are subject to a three-year monitoring period. During this three-year monitoring period, if your conditions change, you might lose your eligibility for this disability discharge program. As a result, you will be required to resume the debt payments. The disability discharge elimination can happen in several conditions:
- Earning more than Poverty Guideline amount through employment
- Receiving new loan- Direct, Perkins loans or TEACH Grant
- Not returning the full amount of new loan the borrower received before the discharge date- within 120 days
- Receiving a document from SSA that the disability is no longer total or permanent.
Besides these conditions, you need to keep the Education Department up-to-date regarding the changes. If your annual earnings increase and exceed the poverty guideline amount, you change your address or phone number, or you improve your disability condition, you have to inform the Education Department.
9. What Happens If Student Loan is Reinstated?
If the qualifications change based on the conditions described above, your student loan forgiveness for disability will be eliminated. As a result, your loan will be reinstated, which means you will be required to repay the debt. Keep in mind that the interest will not accumulate and be added to your balance for the periods that you were not paying the debt.
Before reinstatement, the loan servicer will inform the borrower about the repayment duties. As a result, the debt will return to the status that existed before the discharge happened. The reinstatement notice includes details, such as the reasons, the first payment date, and contact details if the borrower believes reinstatement is not the right action.
10. What are Poverty Guidelines?
The monitoring period requires reinstatement if the borrower’s income exceeds poverty guidelines for a family of two. Keep in mind that your actual family size does not matter. The threshold is set to a family of two. You can find the exact amounts for poverty guidelines on the official Disability Discharge website. The amounts can differ based on your settlement location, and it is based on the income from employment activity. Child support, retirement income, unemployment benefits, or spouse’s income are not considered for poverty guidelines.
11. Changes due to COVID-19
During the three-year monitoring period, it can be necessary to submit annual earning information. If not provided, the borrower can lose student loan forgiveness for disability. During COVID-19, borrowers faced many challenges to submit this documentation. Luckily, the government recognized the challenge.
As a result, the government waived the annual earning documentation requirement for borrowers in a three-year monitoring period. Besides, if the borrower’s debt was reinstated due to not submitting this documentation after March 13, 2020, the reinstatement is canceled.
12. Student Loan Forgiveness Disability- Tax Consequences
Borrowers in need of forgiveness programs are usually concerned about taxation of the forgiveness. When they finally find out that they are free of the debt, they face another challenge-paying additional substantial income taxes.
If you are worried about student loan forgiveness disability tax consequences, be careful. You might or might not be entitled to additional taxes, depending on when you received the discharge. All borrowers receiving the student loan forgiveness for disability on or before January 2018 are required to pay income tax for the forgiveness amount. However, borrowers receiving discharge between January 2018 and December end 2025 do not need to pay income tax for forgiveness.
13. How is the Discharge Date Determined?
We mention that the taxability depends on the discharge receiving date. Depending on how you proved disability, the discharge date can change. For borrowers who utilized VA documentation for student loan forgiveness for disability, the discharge date is the date when the officials approve it.
However, in the case of SSA and Physician’s certification, the three-year monitoring period is existing. Hence, the discharge date is considered when the monitoring period ends. In other words, the discharge date is different from when you receive a discharge. You receive forgiveness before the three years, but the discharge date is after the monitoring period.
Let’s provide an example of this difference. Your debt (through SSA or Physician’s certificate) is discharged in 2017, while the three-year monitoring period ended in 2020. In this case, your debt is not taxable because the discharge date is considered 2020, not 2017.
Total and Permanent Disability Discharge is a great favor from the government for disabled borrowers. As a result of this program, disabled people can get rid of 100% of the debt. Although this program is mainly provided to federal loan borrowers, private loan borrowers can also access this benefit. However, it largely depends on private lenders- only a few lenders will allow forgiveness due to disability.
This guide explained all eligibility conditions and application details of student loan forgiveness for disability. For more information and questions, you can check the official disability discharge website. Alternatively, you can contact our debt specialists. In Student Loans Resolved, we work with debt experts with years of experience. We have helped thousands of borrowers sharing similar concerns as you have. Debt specialists can analyze your finances and develop the most suitable debt management plan.