Buried in Student Loans? You May Be Eligible to Cancel Them

Many people living with a disability must make ends meet on a very fixed income, often limited to Social Security Disability Income (SSDI). Paying a student loan on a fixed income can be a huge hardship someone in this situation.

If you are permanently unable to work due to a disability, you may be able to obtain a total and permanent disability (TPD) discharge of your federal student loan debt. You also may qualify for a debt release related to a Teacher Education Assistance for College and Higher Education (TEACH) Grant.

What is the TPD Discharge Program?

The TPD Discharge Program is a program set up by the U.S. Department of Education and administered by a student loan servicer. The program allows individuals who meet specific criteria due to their permanent disability to be relieved of their obligation to repay certain federal student loan debts.

To receive a TPD discharge, you must apply with specific documentation that shows you are totally and permanently disabled. If you do not have supporting documentation, there is an option to have a physician certify that you are totally disabled. The appetite for physicians to sign these documents varies and largely depends on your circumstances.

What Types of Federal Student Loan Debt Can Be Discharged Under the TPD Program?

If you qualify for a TPD discharge, the following federal student loan debt can be relieved:

• Direct Loans

• Federal Family Education Loans

• Perkins Loans and/or

• EACH Grants

How Does a Person Show They Are Totally and Permanently Disabled?

There are several ways to qualify for a TPD discharge:

The first may occur due to information the Department of Education (DoE) obtains from Veterans Affairs or the Social Security Administration.

• Veterans – For veterans with a service-related disability that is 100 percent disabling or has been categorized as totally disabled based on a unemployability rating, they may qualify for a TPD discharge. Their loans may be automatically discharged unless they inform the DoE otherwise.

If you are a veteran, but have not been contacted by DoE and believe you meet these criteria, you can submit your own TPD discharge application, along with supporting documents.

• Certain SSDI Recipients – A second way to qualify for a TPD discharge is if a person is currently receiving Social Security Disability Insurance (SSDI) with a review period of five to seven years.

Similar to the preceding example, their debt may be automatically discharged unless they inform the DoE otherwise.

If you have not been contacted by the DoE and meet these criteria, you can submit a TPD discharge application with supporting documentation regarding your SSDI benefits and applicable review period.

• Medically Certified Individuals – The third way to qualify for a TPD discharge is to get a certification from a U.S. licensed doctor (M.D. or D.O.).
  The certification must state a person cannot engage in any substantial gainful activity due to one of the following:
  • Their physical or mental disability will likely result in death;
  • Their physical or mental disability has lasted for a continuous period of 60 months; or
  • Their physical or mental disability is expected to last for a continuous period of at least 60 months.

This is submitted with a TPD application for consideration by the DoE.

The application requirements and the process are slightly different depending on which way you seek to qualify for a TPD discharge.

What Happens If I Am Approved for a TPD Discharge?

If you are approved, that is mostly great news. It can stop any wage garnishment or Treasury Offsets you may be experiencing related to your federal student loan debts.

If you receive a discharge based on your veteran’s circumstances, you are eligible to receive a refund of any payments you made on the debt after your disability date. In addition, your loan holder will discharge your loan once they receive notice of the TPD approval.

If you receive a discharge based on your SSDI or a doctor’s certification, the DoE will notify each federal student loan creditor. Each creditor will be instructed to refund payments made after your disability date. Then your loan holder will transfer your debt to the DoE, and the DoE will discharge it, subject to a three-year post-monitoring period.

If something happens during this period where the DoE determines you no longer qualify, the DoE can reverse the TPD discharge. You would then have to repay your student loans.

Note that “disability date” is measured differently for veterans-based TPD discharges versus SSDI/Doctor’s certifications TPD discharges. For veterans, your “disability date” is the date the VA determined you were disabled, per one of the two criteria discussed above.

For qualifying SSDI recipients, your “disability date” is the date DoE received your supporting Social Security documents. For medically certified individuals, it is the date the doctor signed your discharge certification. There are some exceptions.

Is A TPD Discharge Taxable?

The debt you discharge due to a TPD discharge may be taxable. If you received a TPD discharge before January 1, 2018, the amount discharged could be considered income and taxed. If you receive the TPD discharge between January 1, 2018, and December 31, 2025, it is not considered income for federal tax purposes. It is not clear what will happen after 2025.

There are many further details and intricacies of the TPD discharge process that are not covered in this article. This is where the advice of a well-informed attorney comes in. Find a professional in your area who can assist you with learning more about TPD Discharge.