Can Student Loans Be Forgiven for a Disability?
Discover the process for federal student loan discharge based on total and permanent disability. Navigate the requirements and secure financial relief.
Federal student loan borrowers facing significant health challenges may find relief through the Total and Permanent Disability (TPD) discharge program. This provision allows for the forgiveness of eligible federal student loans and TEACH Grant service obligations for individuals unable to engage in substantial gainful activity due to a lasting physical or mental impairment. The TPD discharge offers a pathway to alleviate financial burdens associated with student debt when a disability severely impacts one’s ability to work.
Understanding Total and Permanent Disability Discharge
Total and Permanent Disability (TPD) discharge is a federal program that forgives eligible student loan debt for borrowers who are totally and permanently disabled. This program helps individuals whose medical condition prevents them from working and earning a living at a level considered “substantial gainful activity,” which refers to work performed for pay or profit involving significant physical or mental tasks.
The TPD discharge applies to several federal student loans, including William D. Ford Federal Direct Loan, Federal Family Education Loan, and Federal Perkins Loans. It also extends to Teacher Education Assistance for College and Higher Education (TEACH) Grant program obligations. Private student loans are not eligible for federal TPD discharge. Nelnet, a Department of Education contractor, administers the TPD discharge program.
Determining Your Eligibility
Eligibility for a Total and Permanent Disability (TPD) discharge can be established through three pathways, each requiring specific documentation. These methods verify that a physical or mental impairment prevents engagement in substantial gainful activity.
Social Security Administration (SSA) Pathway
Borrowers can qualify if they receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits. The SSA notice of award must state that the next scheduled disability review will be 5 to 7 years or more from the date of the most recent SSA disability determination. Some borrowers identified through data matching between the Department of Education and the SSA may receive an automatic discharge notification.
Department of Veterans Affairs (VA) Pathway
Veterans can qualify for TPD discharge if the VA has determined they have a service-connected disability or disabilities that are 100% disabling. Qualification also extends to veterans deemed unemployable due to a service-connected disability.
Medical Professional Certification Pathway
A licensed medical professional, such as a doctor of medicine (M.D.) or doctor of osteopathy (D.O.), must certify on the TPD discharge application that the borrower is unable to engage in any substantial gainful activity. This certification must confirm that the impairment can be expected to result in death, has lasted for a continuous period of at least 60 months, or is expected to last for at least 60 months. The medical professional must be licensed to practice in the United States. Other authorized professionals include nurse practitioners, physician assistants, and certified psychologists at the independent practice level.
Gathering Required Documentation
After identifying an eligibility pathway, borrowers must collect specific documentation to support their TPD discharge application. The required documents vary based on the chosen pathway.
SSA Documentation
For the SSA pathway, the primary document is the SSA notice of award for SSDI or SSI benefits. If the notice does not clearly indicate the next scheduled disability review, borrowers can request a Benefits Planning Query (BPQY) from the SSA. This document provides a summary of benefits and the scheduled review date.
VA Documentation
Veterans applying via the VA pathway must provide official VA records confirming their disability status. These records should show a service-connected disability rated as 100% disabling or a determination of unemployability due to a service-connected condition.
Medical Professional Certification Documentation
For the Medical Professional Certification pathway, a licensed medical professional must complete a specific section of the TPD Discharge Application. This section, often Section 4, requires the physician to provide their license information, the diagnosis, and the prognosis of the impairment. The official TPD Discharge Application form is available from Nelnet, the Department of Education’s TPD discharge servicer, often through DisabilityDischarge.com.
Applying for TPD Discharge
Once documentation is gathered, borrowers can submit their TPD discharge application. Nelnet, the TPD discharge servicer, facilitates this process.
Borrowers can submit their completed application and supporting documents online through Nelnet’s website, by mail to the U.S. Department of Education, or by fax. Nelnet often provides a partially completed application PDF for printing and completion.
After submission, Nelnet reviews the application for completeness and initial eligibility. During this review, eligible federal student loans are typically placed on administrative forbearance, temporarily suspending payment requirements. The Department of Education then makes a final determination. Borrowers receive notification of the decision, which can take several weeks to months.
Post-Discharge Obligations
Upon TPD discharge approval, borrowers enter a three-year post-discharge monitoring period.
During this period, loans may be reinstated if:
Annual earnings from employment exceed the poverty guideline amount for a family of two in their state. While active monitoring by the Department has changed, this income threshold still applies.
The borrower receives a new federal student loan or TEACH Grant.
The Social Security Administration determines the borrower is no longer disabled or changes their continuing disability review period to be shorter than the initial qualifying period.
Veterans discharged based on VA documentation are exempt from this monitoring period.
Regarding tax implications, federal student loans discharged due to total and permanent disability are tax-free at the federal level through December 31, 2025, as established by the American Rescue Plan Act of 2021. After this date, discharged amounts may be considered taxable income by the Internal Revenue Service unless new legislation extends the exemption. Some states may still consider the discharged amount as income for state tax purposes, so consulting with a tax professional is advisable.