No one wants to think about what might happen to their life—and their finances—if they end up with a debilitating sickness or injury. But fortunately, there are options, albeit ones that you hopefully never need to use.
When it comes to student loans, there is a program that allows students to discharge their student loans called the total and permanent disability discharge (TPD) program . In this sense, “discharge” means you are no longer responsible for the loans.
Before we go any further, we should mention that if you need to seriously consider student loan disability discharge, you should consult the U.S. Department of Education (DoED), and carefully review the application instructions on the DoED’s website .
The student loan disability discharge program is run through the DoED, so borrowers can only apply to have their federal loans discharged. This program won’t work for private loans procured from outside lenders.
Below, we’ll discuss the details of the student loan disability discharge program, including who is eligible for the program.
What is Student Loan Total and Permanent Disability Discharge?
Student loan disability discharge relieves borrowers from having to repay their federal student loans in the event of total and permanent disability. As you’ll learn later, the “permanent disability” part is important.
Included in the program are loans issued by the William D. Ford Federal Direct Loan Program (Direct Loans, also known as Stafford Loans), the Federal Family Education Loan Program (FFEL), and the Federal Perkins Loans. The program doesn’t just apply to loans, though: Borrowers in a TEACH Grant service program may also be relieved from having to complete whatever service obligation remains in their program.
Applying for Student Loan Disability Discharge?
First, it is helpful to understand that the U.S. Department of Education works with Nelnet , a service provider, to process the applications. Your correspondence will run through them, not the DoED.
The first step is to fill out a TPD discharge application. In order to do so, you’ll also need to gather together documentation showing that you meet the U.S. Department of Education’s requirements for being “totally and completely disabled .” There are three ways to provide the necessary documentation:
1. Through the VA
If you are a veteran, you can work with the U.S. Department of Veteran Affairs (VA) to provide you with the documentation needed to prove that you are permanently disabled from a service-related injury.
2. Through the Social Security Administration
If you are already receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you can use documentation from the Social Security Administration (SSA).
3. Through a Physician
You also can have a physician (an MD or DO) certify that you are unable to earn money in any substantial way due to a physical or mental impairment. If you want to take this route, you’ll need to complete your application within 90 days of the physician signing your TPD . Here are the current official qualifications :
• The impairment could result in death.
• The impairment has lasted for a continuous period of at least 60 months.
• The impairment can be expected to last for a continuous period of at least 60 months.
What Happens if I’m Approved for Student Loan Disability Discharge?
It depends on whether you were approved through the VA, Social Security, or your physician.
If you provided documentation from the VA, the following will happen upon approval :
• You’ll be notified of the discharge
• Your loan holders will be instructed to return any loan payments received on or after the effective date of the disability determination
If you provided documentation from the Social Security Administration or from your physician, there’s an extra catch:
• You’ll be notified that you are subject to a three-year monitoring period. Your loans or TEACH work obligation could be reinstated if you don’t meet certain requirements at any time
Let’s talk about this monitoring period. Your obligation(s) could possibly be reinstated in the event that:
• Your annual earnings from employment exceeds the poverty guideline amount for a family of two in your state, regardless of your actual family size
• You receive a new federal student loan under the Direct Loan Program or a new TEACH Grant
• You receive another payment of a Direct Loan or a TEACH Grant that was first disbursed before your discharge was approved, and the new disbursement has not been returned to the loan holder within 120 days of the disbursement date
• You receive a notice from the SSA stating that you are no longer disabled
Basically, your loans will pick back up in the event that you can earn an income above the poverty line, you receive new federal loans, or the Social Security Administration determines that you’re no longer disabled. Just know that the DOE and Nelnet are absolutely monitoring your ability to earn an income during this time.
What is Student Loan Refinancing?
Another option for lowering your overall costs is refinancing your student loans. Some online lenders, like SoFi, can refinance both federal and private loans. Because you are using an all-new loan to pay off an existing loan, it is also possible to change the terms of the loan, such as shortening the loan term (which means saving interest over the life of the loan) or lengthening the loan term (which means lowering your monthly payments, but potentially paying more over the life of the loan).
Refinancing could save a borrower money on their loan, but of course, you still need to proceed down this route with caution. Refinancing is done with a private company, and therefore the new loan is a private loan. This means that the borrower will not be able to use TPD, income-driven repayment, or other federal loan programs. If you think you might want to pursue TPD or other federal loan programs in the future, refinancing your federal loans may not be the right choice.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.