For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Written By Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Personal Finance Writer Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Written By Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Correspondent/EditorUpdated: Aug 24, 2021, 3:20pm
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Getty
It’s something no one wants to think about, but accidents and illnesses are painfully common. The Social Security Administration (SSA) reported that 25% of 20-year-olds will become disabled before they reach retirement age.
If you’re unable to work, you’ll struggle to make ends meet, let alone keep up with your student loan payments. However, there is some potential relief available to borrowers with federal student loans through the Total and Permanent Disability Discharge (TPD) program.
Qualified borrowers can apply to have the government forgive their outstanding student loans, eliminating their obligation to repay the debt.
The federal TPD has been available to student loan borrowers since the Higher Education Act of 1965 was passed into law.
Under this program, federal loan borrowers that meet the government’s definition of “totally and permanently disabled” can have 100% of their outstanding loan balance discharged.
When you apply, you submit your application to Nelnet , the federal loan servicer that manages the TPD program. If your application is approved, your monthly payments are suspended, and you typically enter into a three-year monitoring period. If you are still disabled at the end of the three years—and are not expected to recover—and have not received income or loans, the government will forgive your remaining loan balance.
Unfortunately, many people don’t realize they’re eligible for TPD and lose out on significant relief. According to the National Student Loan Defense Network, approximately 589,000 student loan borrowers were identified by the SSA as eligible for TPD. Over 60% of eligible borrowers did not apply for TPD, usually because they didn’t know the program existed or didn’t understand the application process.
That’s why it’s so important to carefully review the program’s criteria. To be eligible for TPD, you must meet the program’s definition of total and permanently disabled. Under the Higher Education Act of 1965, that means borrowers must be unable to work due to physical or mental impairments that are expected to last for 60 months or more.
The disability information is verified in different ways.
If you are a veteran of the U.S. armed forces, you can qualify for TPD by providing documentation that shows the Department of Veterans Affairs (VA) issued you a disability determination due to either of the following reasons:
Note: In August 2019, then-President Trump signed a presidential memorandum that expanded TPD for veterans. Under the new rules, veterans that were determined by the VA to be 100% disabled or unemployable due to disability will automatically qualify for loan discharge through TPD unless they opt out.
The government uses the SSA system to find borrowers that are eligible for TPD. If the SSA decides you are eligible, they will send you a notice of your eligibility for the program containing next steps. However, the SSA may miss you under certain circumstances, or a mail error can prevent you from receiving the notice. If that happens, you can apply by filling out a discharge application and submitting supporting documentation.
If you receive Social Security Disability Insurance or Supplemental Security Income, you may qualify for TPD by submitting a copy of your SSA notice of award or benefits Planning Query that shows your next disability review date. To be eligible, your next disability review date must be at least five to seven years from the date of your late SSA disability determination.
If you don’t qualify for TPD under the rules for veterans or Social Security recipients, you may be eligible if you are diagnosed by a qualifying doctor—a Doctor of Medicine (M.D.) or doctor of osteopathy or osteopathic medicine (D.O.) licensed to practice in the United States.
To apply for TPD, your physician will have to fill out part of your discharge application stating that you are unable to work due to physical or mental impairments that will result in death, has lasted continuously for the past 60 months, or can be expected to last for the next 60 continuous months.
Borrowers with these federal student loan types are eligible for TPD:
If you have private student loans, you are not eligible for the federal TPD discharge program. However, some major private student loan lenders—including Discover, Laurel Road and Sallie Mae—will forgive your remaining balance if you become permanently disabled. Contact your lender directly to find out what their policies are for loan forgiveness.
To begin the application process for TPD, follow these steps:
U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501-7130
Fax: 303.696.5250
Email: DisabilityInformation@Nelnet.net
If approved, you’ll receive a notification, and you’ll enter into a three-year monitoring period. In any of the following circumstances, the government will reinstate your loans and you’ll have to repay your debt:
If you are eligible for TPD, the program can provide you with a significant amount of financial relief. It will completely eliminate your debt and remove that weight off your shoulders.
However, there are some things to keep in mind:
If your loans are forgiven through TPD, your borrowing options in the future may be limited.
The amount the government discharged through TPD was previously taxable as income for federal tax purposes. However, a new law was implemented that said loans discharged through TPD on or after January 1, 2018 are not taxable as income for your federal tax return. That rule is set to expire on December 31, 2025, so future TPD program participants may have to pay federal income taxes.
Depending on the state where you live, the amount discharged through TPD could be subject to state income taxes; that’s why some borrowers eligible for TPD opt out of the program. If you’re concerned about the impact loan forgiveness would have on your tax bill, consult with a tax professional.
If you have federal student loans but don’t qualify for TPD discharge, there are ways to make your debt more manageable:
If you’re ill or have been injured and can’t afford your loan payments, contact your loan servicer right away to discuss your options. There may be financial hardship assistance programs you can use to lower or suspend your payments while you recover.
