If You Become Disabled, Are Your Student Loans Forgiven?

Federal student loans may be discharged through a Total and Permanent Disability (TPD) discharge if you live with a permanent disability. This program provides financial relief by relieving eligible individuals of their obligation to repay certain federal student loans. TPD discharge applies to William D. Ford Federal Direct Loan Program loans, Federal Family Education Loan (FFEL) Program loans, and Federal Perkins Loans. It also extends to Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligations.

Eligibility for Student Loan Disability Discharge

Qualifying for a TPD discharge requires meeting specific criteria regarding your disability and loan type. Only federal student loans are eligible for this discharge. Private student loan lenders are not mandated to offer similar provisions, though some may have their own policies. This distinction is important because private loan terms are set by individual lenders, lacking the uniform federal guidelines.

A “total and permanent disability” refers to a physical or mental impairment preventing substantial gainful activity. This condition must be expected to result in death, have lasted, or be expected to last for at least 60 continuous months. This definition focuses on long-term or lifelong severe impairments. There are three ways to demonstrate this level of disability for a TPD discharge.

Documentation from the Social Security Administration (SSA)

One method is providing documentation from the Social Security Administration (SSA). You qualify if you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits. Your SSA documentation must indicate your next continuing disability review is scheduled within five to seven years or more from your last SSA disability determination. Alternatively, you may qualify if your disability onset date was at least five years prior to your TPD application or if you receive benefits based on a compassionate allowance.

Documentation from the U.S. Department of Veterans Affairs (VA)

Another pathway for veterans is documentation from the U.S. Department of Veterans Affairs (VA). Veterans qualify by providing VA documentation showing a 100% unemployable disability determination due to a service-connected condition. The Department of Education often receives information directly from the VA and SSA, which can lead to an automatic discharge notification for eligible individuals.

Physician’s Certification

The third method for proving TPD is a physician’s certification. A licensed medical professional, such as a doctor of medicine (MD), doctor of osteopathy (DO), physician’s assistant (PA), nurse practitioner (NP), or licensed psychologist, can certify your condition. This certification must state you are unable to engage in any substantial gainful activity due to a medically determinable physical or mental impairment that meets the duration requirements. This option is available even if you are not receiving benefits from the SSA or VA.

The Disability Discharge Application Process

After determining eligibility and gathering documentation, formally apply for the TPD discharge. Nelnet, the servicer designated by the Department of Education, primarily manages the application process. You can initiate the application online through the Nelnet Total and Permanent Disability (TPD) Discharge website or via StudentAid.gov.

Upon initiating the application, the Department of Education identifies your federal student loans and instructs loan servicers to suspend collection activities for up to 120 days. If your application is not received within this period, repayment obligations may resume.

Submit your completed application and supporting documentation through various methods, including online upload, mail, or fax. For some individuals, particularly those identified through VA or SSA data matching, the discharge process may be automatic; they will receive a notification of eligibility and can opt out if desired.

After submission, Nelnet reviews the application and documentation. The review process takes less than a month. If approved, you receive a notification confirming your loans have been discharged. If denied, you may appeal the decision or reapply with new information within a specific timeframe.

Post-Discharge Requirements

After a TPD discharge is granted, certain requirements and implications follow, including a monitoring period and potential tax consequences. For borrowers whose TPD discharge is approved based on SSA documentation or a physician’s certification, a three-year monitoring period is imposed. This period begins on the date the discharge is approved.

During this three-year monitoring period, specific conditions must be met to maintain the discharge. Your loans could be reinstated if annual earnings from employment exceed the poverty guideline amount for a family of two, regardless of your actual family size. Only income from employment or self-employment is considered for this threshold; unearned income, such as Social Security Disability benefits, child support, or other federal or state public assistance, does not count.

Another condition for reinstatement involves taking out new federal student loans or receiving a new TEACH Grant. If you enroll in new federal student aid, your previously discharged loans could be reinstated, requiring you to resume repayment. A reinstated loan reverts to its original status, though no interest is charged for the period it was discharged. However, if your TPD discharge was based on VA documentation, you are not subject to this three-year post-discharge monitoring period.

Regarding tax implications, the discharged loan amount is not considered income for federal tax purposes if the discharge occurred between January 1, 2018, and December 31, 2025. This federal tax exemption is due to provisions in the Tax Cuts and Jobs Act of 2017. For TPD discharges based on SSA documentation or a physician’s certification, the loan is considered discharged for federal tax purposes at the end of the three-year monitoring period. For VA-based discharges, the tax date is the approval date of the discharge.

While federal tax liability is often waived, state tax laws vary, and you may still owe state income taxes on the discharged amount. Consult a tax professional for advice. The federal tax exemption is set to expire at the end of 2025; unless Congress extends it, discharged amounts could become taxable again in subsequent years.