Understanding Student Loan Forgiveness in Cases of Disability Discharge

Student loans are an integral necessity for many students looking for higher education. Today millions of students pay through college with the help of student loans. Unfortunately for many, these loans have become a financial burden to deal with post-college. Loan repayments have gotten steeper over the years, with students struggling to meet their financial obligations. With this in mind, the government has introduced student loan forgiveness programs to ease the burden. One such program is Disability Discharge. 

As the name suggests, this program is not for everyone. Individuals who come across an undesirable situation, which results in long-term disability and inability to work, can apply for this program. This article will comprehensively discuss disability discharge for student loan forgiveness. If you’ve been a victim of long-term disability and you are in the middle of a student loan repayment, this article is for you.

Disability Discharge Program for Student Loan Forgiveness

You can gain student loan forgiveness in multiple ways. They include, teacher loan forgiveness, PSLF, and more. In this article, we will discuss student loan forgiveness due to disability discharge.

What is Discharge Due To Disability?

You may be eligible for a discharge due to disability. For this, you must be totally or permanently disabled. Discharge in this context means the forgiveness or cancellation of the loan that the borrower has to pay. Here, the borrower may be free of paying some or the full amount of the remaining interest and principal. Disability discharge covers only several loans. They are the Federal Family Education Loan, Federal Perkins Loan, and William D. Ford Federal Direct Loan Program loan. Besides, being disabled can free you from the service obligation of TEACH Grant. 

To be eligible for total and permanent disability (TPD), you need to prove your disability. For this, you have to fill and submit a discharge application about TPD to Nelnet. Also, you must show the necessary documentation to Nelnet, indicating you meet requirements to be accepted as disabled. Nelnet is, by the way, the servicer that supports the Department of Education of the US regarding the TPD discharge procedure. 

How to Show the Eligibility for TPD?

Disability discharge

To show your eligibility for TPD, you have to show proof from one of three sources. These sources are: 

  • The Department of Veterans Affairs of the US
  • The Social Security Administration
  • A registered physician

Particular requirements exist for each kind of supporting documents in these cases. So, you need to indicate them to prove your qualifications.

Veterans Affairs Documentation

In case you are a veteran, you may be eligible for a TPD discharge. For this, you have to supply documentation from the Veterans Affairs, proving you have obtained a Veterans Affairs disability determination. You will be able to receive this disability determination on two occasions. The first one was when a service-related disability happened, which is 100% disabling. The second one is based on unemployability rating; you are totally disabled. 

Social Security Administration Documentation

You can be eligible for a total and permanent disability discharge if you qualify for Supplemental Security Income or Social Security Disability Insurance. For this, you have to show either your Benefits Planning Query or Social Security Administration notice of award. These documentations have to prove that your latter disability review will happen 5-7 years from your last Social Security Administration (SSA) disability determination.

Documentation from Physician

A certification from a physician would suffice for your TPD discharge, too. For this, a physician has to show that you cannot do any considerable gainful activity because of a mental or physical disability. This disability may be anticipated to result in death. Or it should have continued for at least 60 months. Or it should be anticipated to continue for at least 60 months. Considerable gainful activity means work that is done for profit. This type of work has to involve a sufficient amount of mental or physical activity or both of them. The physician providing you with TPD documentation must be licensed to work in the US. Additionally, the doctor must be a doctor of osteopathic medicine or a doctor of medicine. 

How to Apply for TPD Discharge?

You have to fill a TPD discharge application and send it to Nelnet as the first step. Note that you have to attach any demanded documentation, too. This documentation must show your qualifications for discharge. If you receive student loan TPD discharge, the TPD discharge application will cover any of your federal student loans. Additionally, you will be free of the TEACH Grant service obligation, too. Nelnet operates as assistance to the US Education Department. Here, it contacts borrowers and TEACH Grant recipients and manages the TPD Discharge process in general. You can go to www.disabilitydischarge.com and learn more about the TPD Discharge application.

You can contact Nelnet by email or phone. Here, you should communicate your desire to apply TPD discharge. In case you do it, the payments you must make for your federal loans will cease for 120 days. It is done so that you can submit your application and any other necessary documentation. You can communicate with Nelnet by phone at 1-888-303-7817 Monday-Friday. The timing is 7 am – 2 am with Eastern time. You can also contact them on Saturday between 8 am and 7 pm. Moreover, note that you can send an email to disabilityinformation@nelnet.net, as well. 

Can Someone Else Apply on My Behalf?

A person or an entity can apply for disability discharge on your behalf. For this, they have to fill and submit the discharge disability application on your behalf. Also, they have to assist you through the whole procedure. To have someone represent you, your representative and you should fill an Applicant Representative Designation form. Before working with your representative, Nelnet should get and process this form. Even if your representative possesses a power of attorney to do something on your behalf, you still must submit the form. 

What Happens When Your Application Is Submitted?

Disability discharge

First, Nelnet will communicate with your TEACH Grant service obligation or federal student loan holders. Nelnet will instruct them to suspend the payment collection on your loans when they explore your qualifications for discharge. It means you won’t have to make any payments during your application’s evaluation process. Second, Nelnet will go through your TPD discharge application together with the necessary documentation. They will need to be sure that your application is not incomplete. Also, they have to be sure that your application contains information proving your eligibility for discharge. Lastly, Nelnet will forward your request to the Education Department. Nelnet will do it once they determine you meet the qualification criteria for a TPD discharge. The Education Department will have the final decision.

What Happens When Disability Discharge is Approved?

It is dependent on the kind of documentation you provide. If you provide Veterans Affairs documentation, Nelnet will inform you about the discharge of your loans or TEACH Grant. They will then tell your loan holders to pay back any payments made by you. It only applies to payments made after the effective date of disability determination of Veterans Affairs. 

If the Education Department identifies your disability based on documentation from SSA, Nelnet will inform you about the discharge of your TEACH Grant and any federal loans. Then, Nelnet will notify your loan holders to pay back any amount made by you after the effective date of your SSA documentation. Besides SSA documentation, any payments will be returned to you made after the date physician verifies your disability. Lastly, Nelnet will inform you regarding a three-year post-discharge monitoring period. This period starts on the approval date of the TPD discharge. Nelnet will also notify you if you may not meet specific criteria during this period. In this case, you will have to start paying your loans or finish the TEACH Grant service obligation. 

What are the Criteria During Post Discharge Monitoring Period?

There are some cases in which you will have to start paying your loans again. If any of such cases happen, you will have to finish your TEACH Grant service obligation, too. The first one is about getting any annual earnings from employment. Note that these earnings shouldn’t excel in the poverty guideline amount for a two-people family in your state. If they do, you will have to start paying for the loans again or finish the TEACH Grant service obligation. Note that this requirement is irrespective of your family size. Also, you should not get any new TEACH grant or a federal student loan forgiveness under the Direct Loan Program. If you do, your TPD discharge will be suspended. These requirements also include any other disbursement of TEACH Grant or Direct Loan that was disbursed prior to your discharge approval. Additionally, it includes cases if the payment was not returned to the loan holder within 120 disbursement date days. 

SSA Notification regarding Disability

Lastly, if you may get a notification from SSA mentioning that you are not disabled anymore. In this case, your disability discharge will be deactivated. They may send you information stating your upcoming disability review will not happen for 5-7 years from your latest SSA disability determination date, too. In both cases, the Education Department will not consider you disabled. So, you will not get TPD discharge. 

Note that Nelnet will provide you with a form. In this form, you will have to submit the documentation regarding your yearly earnings from employment. You should not fail to submit this form. If you do so, you will be back to finishing your TEACH Grant service obligation. Needless to say, your responsibility to pay your loans will be active again.

Moreover, note that the Department of Health and Human Services updates the poverty amounts guidelines yearly. So, Nelnet will inform you about the present poverty guideline. They will do it based on every year of the post-discharge monitoring period. 

Lastly, the approval of your TPD discharge application from Veterans Affairs will let you avoid the post-discharge monitoring period. 

Reactivation of Paying Loans or Serving TEACH Grant

Your student loan repayment or TEACH Grant service obligation can be active again. In this case, based on the promissory note you signed, you will have to pay back your loans. Also, based on TEACH Grant Agreement to Serve terms, you will have to keep serving if you have been in this grant. In case you applied for loan discharge, your loans will go back to the previous status. This status is where they were before you applied for a disability discharge. It also means your loan will go back to default status if they were in default before. 

Additionally, Nelnet will clarify the motives for recovery for loan repayment or TEACH Grant if they happen. They will inform you regarding what you can do about the restoration of your loans, too. It will happen if you think the recovery of the components mentioned above was not correct.

What Happens When TPD Discharge is Rejected?

Disability discharge

The Education Department may find you non-eligible for a TPD discharge. In this case, Nelnet will inform you about the reason for the rejection of your discharge application. Also, they will clarify that you may ask the department to reassess your discharge application. It will only happen if you present new information to them. Note that this information should contain details about your eligibility. Further, you must submit this information no later than 12 months from the date you received the rejection information. Additionally, Nelnet will tell you what can happen if you don’t ask for a reassessment of your discharge application within the required time. 

In this case, you may again want the department to check your eligibility. For this, you will have to submit a new TPD discharge application. Note that this application should contain new information about your disability. Moreover, Nelnet will inform you that you have to start paying back your loans. Here, the loan holder will contact you regarding the date of your first payment. Lastly, Nelnet will also inform you about the TEACH Grant service obligation. So, if you had applied for its discharge, you will again have to start paying its duties. 

Possibility of Taking Loans after Receiving TPD Discharge

You may want to go back to school after receiving TPD discharge. For this, you may again have to take loans or take TEACH Grants. If you wonder whether it is possible or not, it is possible. But with some terms only.

As you already know, you may receive student loan disability discharge based on three documents. These are Veterans Affairs, Social Security Administration, and documentation by a physician. In any of these cases, you have to present your school a letter from a physician. This letter should clearly state that you can do a considerable gainful activity. Also, you must sign a statement that you can’t get a TPD discharge of the new student loan help or TEACH Grant. It applies to your disability that is current. In case your condition worsens in the future, you may apply for TPD Discharge again for the new loan. 

Additionally, you will have to continue making your payments if your three-year post-discharge period hasn’t finished. Of course, you will have to do this when you get TPD discharge based on physician or SSA documentation. You will have to admit your responsibility to meet the obligations of TEACH Grant, too. 

Taxation on The Loans Discharged

The taxation issue of your discharged loan depends on the date. In other words, there was a change in federal law related to this matter. Briefly, if you got the student loan disability discharge before January 1, 2018, your loan may be taxable. But if you got it between January 1, 2018, and December 31, 2025, it will be free of tax. Also, note that the date you received discharge differs based on the documentation you received. So, if you received discharge based on Veterans Affairs, you will get the discharge on the same date the Education Department approves it. In SSA and physician cases, it is different. You will receive the discharge at the end of the monitoring period. So, till that time, you will not have to pay any taxes for the discharged loan amount. 

Conclusion

As you can see, there are many details involved in TPD discharge. To receive a student loan discharge, there is so much more involved. You have to be able to prove your disability to the Department of Education DOE. Also, you need to be patient to receive the disability discharge. In this article, we discussed TPD discharge in more detail. This should help you when filing for federal student loan forgiveness. If you found this blog informative, you should check out related articles on our other page.