Published on: May 25, 2017
Disability benefits are normally granted to individuals who suffer from a physical or mental impairment that prevents them from participating in most forms of work or any substantial gainful activity. Because persons receiving such benefits are unable to work productively, they may also be eligible for student loan forgiveness.
Therefore, depending on the nature of your disability, there may be several channels available to you through which you can cancel your student loans. This article will explore those channels.
Federal student loans can be cancelled as a result of a total and complete disability that is expected to last for 5 or more years, or result in death. This is referred to as the Total and Permanent Discharge (TPD). Veterans who obtained a disability as a direct result of their service are also eligible for the TPD program. TPD applies to the following loans:
- The Federal Direct Loan Program
- The Federal Family Education Loan (FFEL)
- The Federal Perkins Loan
- The Teacher Education Assistance for College and Higher Education (TEACH)
A prerequisite for this cancellation is that your conditions should have developed after you took out the loans, or that your condition significantly deteriorated from the time you took out the loans.
Determination of Eligibility
There is are differences between disability recognition by the SSA and the Department of Education’s ability to forgive your student loans through TPD. Typically, TPD requirements are harder to meet.
The federal TPD stipulates that, to receive student loan forgiveness, you must be unable to engage in any substantial gainful activity (SGA), which is work that is relatively involving and leads to a substantial amount of income. The disability should also be as a result of a physical or mental impairment that can be medically determined. The condition must have lasted for at least 60 months at the time of the application, and is expected to last for an additional 60 months, or result in death.
This eligibility is different from the SSA's eligibility for disability benefits, in that the SSA only requires that your inability to work lasts at least 1 year, instead of 5 years. There are situations in which the SSA grants disability benefits, with the first reviews conducted in 5-7 years (this is classified under a group called Medical Improvement Not Expected, or MINE). Awards granted under this classification often result in automatic forgiveness of student loans because the disability is determined to be significantly impairing and will last for at least 5 years.
Application Process
In order to apply for a TPD, you need to fill out an application that should be certified by your doctor in regards to the disability. Your doctor should provide details regarding the diagnosis, severity of your condition, and the resulting limitations to your ability to work.
The application should be submitted to each loan holder, who will review your application and arrive at a decision. Applicants who have received an automatic 5-year disability grant by the SSA can provide documentation on that grant to their loan holders as evidence of the disability.
Approval and Monitoring Period
If your discharge application is approved, there is a 3-year period under which your income levels will be monitored. The income monitored does not include your disability payments. During this period, if your income is determined to be substantial, you may be required to continue to repay your loans.
Your income levels will be reviewed according to the poverty guidelines of your state for a family of two. This means that if you continuously receive an income that is above the family of two poverty line for your state, your discharge from repaying your loans could be reversed.
Once you receive a discharge, you will face a hurdle if you request any future student loans. In fact, you may have to continue to repay your previously discharged loans if you request and receive any federal loans in the future.
Cancellation of Loans Due to Death
In the event of a student's death, debts will automatically be cancelled. For parents who took out joint loans under the PLUS program, the death of a spouse only wipes out the portion of debt that the deceased owed, and the remaining portion should still be repaid.
