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In August 2021, the U.S. Department of Education announced that more than 323,000 federal student loan borrowers qualified for complete student loan forgiveness due to total and permanent disability. The new regulation will forgive more than $5.8 billion in student loan debt. Here's what you need to know about the program, whether you may qualify and what your options are.
What Is Total and Permanent Disability Loan Forgiveness?
The total and permanent disability (TPD) discharge program provides complete forgiveness for eligible student loan borrowers with direct loans, Federal Family Education Loans (FFELs) and federal Perkins loans.
Additionally, if you received a TEACH Grant, you may qualify to be exempt from the program's service obligation. There are three ways you can qualify for TPD forgiveness.
Physician's Certification
You can qualify for the program by having a physician—either an M.D. or a D.O. licensed to practice in the U.S.—certify that you're unable to engage in "substantial gainful activity" due to mental or physical impairment that meets one of three requirements:
- It's expected to result in death
- It has lasted for a continuous period of 60 months or more
- It's expected to last for a continuous period of 60 months or more
The Department of Education defines substantial gainful activity as a level of work that involves significant mental or physical activities, or a combination of both.
U.S. Department of Veterans Affairs Documentation
If you're a veteran, you can qualify by providing documentation from the Department of Veterans Affairs (VA) showing that you have a service-connected disability that's 100% disabling or that you're totally disabled based on a VA individual unemployability rating.
Social Security Administration Documentation
If you're eligible for Social Security Disability Insurance or Supplemental Security income, you can qualify for TPD forgiveness by providing documentation from the Social Security Administration (SSA) that your next scheduled disability review is five to seven years or more from your last disability determination.
How to Apply for Total and Permanent Disability Loan Discharge
The Department of Education proactively works to identify student loan borrowers who qualify based on VA or SSA criteria, so there's generally no application necessary for those who meet those qualifications.
If you're found to be eligible, the Department of Education should send a letter to notify you and provide a date by which you can tell the agency that you don't want the discharge. If you don't respond, your loans will be automatically forgiven.
If you haven't received such a letter and believe you qualify or if you think you're eligible based on a physician's certification, you can submit an application with your documentation to Nelnet, the servicer that handles TPD cancellations, via the TPD discharge website.
You can also apply by phone or email if you prefer. If this is the case, payment requirements on your federal loans will pause for 120 days, so you have time to submit any supporting documents.
If your disability makes it so you can't apply on your own, someone can help you. Before they apply on your behalf, though, you and your representative will need to complete an applicant representative designation form, which you can download from the TPD Discharge website.
Once your application is submitted, Nelnet will explain the review process. You won't be required to make monthly payments while the application is being reviewed.
How Do I Know if My Loans Have Been Forgiven?
If the Department of Education determines that you qualify for a TPD discharge, you'll receive a notification that your loans have been forgiven or your TEACH Grant service obligation does not need to be completed. You'll also receive a refund of any loan payments you made on or after the effective date of your disability certification.
If you qualify due to SSA documentation or a physician's certification, note that you will be subject to a three-year monitoring period. If you don't meet certain conditions at any time during this period, your loan or grant service obligation will be reinstated.
Reinstatement may occur if any of the following happens during the three-year period:
- Your annual earnings from employment exceed the poverty guideline amount for a family of two in your state.
- You receive a new federal student loan under the direct loan program or a new TEACH Grant.
- You get another disbursement from a direct loan or TEACH Grant that was first disbursed before your discharge, and you don't return it within 120 days.
- The SSA notifies the Department of Education that you're no longer disabled or that your next scheduled disability review will no longer be five to seven years from your last determination.
What if I'm Disabled but Don't Qualify for Discharge?
If you don't meet the requirements for a TPD discharge, but you still have a hard time keeping up with your monthly payments because of your disability, there are financial assistance programs available for other aspects of your finances that can help make room in your budget:
- Medicare can help cover your medical costs if you have an eligible disability.
- Medicaid can help cover your medical costs if you have a low income.
- The Housing Choice Voucher Program, also called Section 8, can help pay part of your rent in an approved rental.
- The Housing Choice Voucher Homeownership Program can help cover certain housing expenses.
- The Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program, can help low-income families with food needs. People with disabilities can qualify for increased SNAP benefits.
You can also reach out to the National Disability Rights Network, Disability Rights Legal Center, National Disability Institute and other nonprofit or charity organizations that can help you get the financial assistance you need.
Other Options for Paying Student Loans
If you're still having trouble making your monthly payments even with other forms of financial assistance, there are still options available:
- After the federal student loan repayment resumes in February 2022, file a request for additional forbearance or deferment and provide supporting documentation of your financial hardship.
- Apply for an income-driven repayment plan, which reduces your monthly payment to 10% to 20% of your discretionary income. What's more, these programs extend your repayment term to 20 or 25 years, after which any remaining balance is forgiven.
- If you're able to work, look into employers that offer student loan repayment assistance programs.
Refinancing your student loans could potentially help give you some more control over your monthly payments and possibly even reduce your interest rate, but you should consider it only if you don't anticipate needing access to federal benefits like forgiveness and income-driven repayment. Refinancing federal student loans to an account with a private lender will lock you out of these benefits.
Finally, while it can be difficult to have student loans discharged in bankruptcy, it is possible in certain situations. If your financial circumstances are dire, consider consulting with a bankruptcy attorney to explore your options.
Make It a Priority to Avoid Missing Payments
Whether or not you believe you qualify for student loan forgiveness, it's important to continue to make your monthly payments on time every month to avoid potential damage to your credit score. Remember that you'll receive all of your payments back if you qualify for forgiveness, as long as they were made after the effective date of your disability determination.
While you're at it, monitor your credit regularly to make sure no other issues pop up that could threaten the health of your credit.