Do You Have to Pay Student Loans on Disability?

Student loan debt can pose significant financial challenges for individuals with disabilities. Federal programs offer relief through loan discharge and adjusted repayment plans. This article explores these pathways, focusing on how borrowers with disabilities can manage their student loan obligations.

Eligibility for Total and Permanent Disability Discharge

The federal government offers a Total and Permanent Disability (TPD) discharge program, which can eliminate the obligation to repay certain federal student loans and Teacher Education Assistance for College and Higher Education (TEACH) Grants. To qualify, a borrower must demonstrate they are totally and permanently disabled through one of three specific pathways.

One pathway involves certification from an authorized medical professional. A licensed MD, DO, NP, PA, or certified psychologist must attest that the borrower is unable to engage in substantial gainful activity due to a physical or mental impairment. This impairment must be expected to result in death, have lasted, or be expected to last for a continuous period of at least 60 months. Substantial gainful activity (SGA) refers to work performed for pay or profit that involves significant physical or mental activities. The Social Security Administration (SSA) defines income thresholds for SGA.

A second pathway to TPD discharge is through documentation from the Social Security Administration (SSA). Borrowers can qualify by providing an SSA notice of award for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits. This documentation must indicate their next continuing disability review is scheduled within five to seven years or more from their last SSA disability determination. The Department of Education may automatically discharge loans for individuals identified as eligible through data matching with the SSA, though borrowers can decline this.

The third pathway is for veterans, requiring documentation from the U.S. Department of Veterans Affairs (VA). Veterans can qualify if the VA has determined them unemployable due to a service-connected disability, or if they have a service-connected disability rated at 100% disabling. TPD discharges based on VA documentation typically do not involve a post-discharge monitoring period, unlike the other two pathways.

Federal student loan types eligible for TPD discharge include William D. Ford Federal Direct Loan Program loans, Federal Family Education Loan Program loans, and Federal Perkins Loans. This also extends to TEACH Grant service obligations. Private student loans are not eligible for the federal TPD discharge program. Some private lenders may offer their own disability-related forgiveness or relief options, but these are independent of the federal program and vary by lender.

The Total and Permanent Disability Discharge Application Process

After determining eligibility for a Total and Permanent Disability (TPD) discharge, borrowers navigate the application process. Nelnet administers the TPD discharge program as the federal servicer for the Department of Education. Borrowers can initiate the application by visiting StudentAid.gov or by directly contacting Nelnet.

The application requires specific documentation, depending on the chosen pathway. If applying through a physician’s certification, the medical professional must complete a designated section of the application form. This certification must be signed by a licensed MD, DO, NP, PA, or certified psychologist and submitted within 90 days of the physician’s signature. For those qualifying via SSA documentation, a copy of the SSA notice of award or Benefits Planning Query (BPQY) indicating the appropriate review period is necessary. Veterans provide documentation from the VA confirming their unemployability due to a service-connected disability or 100% disability rating.

Applications and supporting documents can be submitted through an online portal or by mail to Nelnet. Borrowers can also designate a representative to assist with and submit the application, though a specific form must be completed. After the application is received, federal student loan payments are typically suspended through an automatic administrative forbearance or deferment while under review, preventing default.

Nelnet conducts an initial review of the submitted information and then forwards the application to the Department of Education for a final decision. The Department of Education communicates the decision to the borrower. If approved, loans are discharged, and payments are no longer required.

For discharges based on SSA documentation or a physician’s certification, a three-year post-discharge monitoring period begins. Income monitoring was eliminated as of July 1, 2023. However, discharged loans can be reinstated if the borrower receives new federal student loans or TEACH Grants within this three-year period. VA-based TPD discharges do not have this monitoring period. For federal tax purposes, the amount of loan discharged due to TPD is generally not considered taxable income through December 31, 2025.

Alternative Options for Student Loan Management

For individuals with disabilities who may not qualify for a Total and Permanent Disability (TPD) discharge, or for those with private student loans, several other strategies can help manage student debt. These alternatives focus on making repayment more affordable or providing temporary relief.

One common approach for federal student loans is enrollment in an Income-Driven Repayment (IDR) plan. These plans adjust monthly loan payments based on a borrower’s income and family size. Payments can be as low as $0 per month, and any remaining loan balance may be forgiven after 20 or 25 years of qualifying payments. Some IDR plans also offer interest subsidies, preventing the loan balance from growing due to unpaid interest if payments are insufficient to cover it.

Temporary payment relief can also be found through deferment and forbearance options for federal student loans. Deferment allows borrowers to temporarily pause payments for specific reasons, such as economic hardship or unemployment. During a deferment, interest on subsidized federal loans is typically covered by the government, meaning the loan balance does not increase. Forbearance also temporarily suspends payments, but interest generally accrues on all loan types during this period, potentially increasing the total amount owed over time. While both options provide short-term relief, deferment is often preferable when available due to the potential interest subsidy.

Managing private student loans when facing disability is different, as these loans lack federal protections and TPD discharge options. Borrowers with private student loans should directly contact their lenders to inquire about any available hardship programs, modified payment plans, or temporary forbearance options. These options vary widely by lender and the specific terms of the loan agreement, so direct communication is necessary to understand what relief might be available. Some major private lenders do offer their own disability forgiveness policies, but these are not universal.