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Discharging Student Loans Due To Disability

Authored By: Northwest Justice Project LSC Funded

This packet contains general information and forms to fill out for discharging student loans due to a severe disability. #1172EN

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Intro

*This has general information only. If you have a specific problem, get advice from a lawyer.  If you are low-income, check the end for how to contact a lawyer.

Use this if your loans are:

  • FFEL

  • Direct

  • Perkins

  • TEACH grants

  • Plus (disability must be the parent’s, not the student’s)

*Do not use this for private student loans. Talk to a lawyer. Some private lenders may offer programs like the one described here.

I took out one of the student loans listed above. I have a severe disability. Can I get a discharge of my student loan?

Maybe, if the Department of Education agrees you have a disability. You will qualify if you cannot engage in any substantial gainful activity due to a physical or mental impairment that is one of these:

  • Expected to last for five years.

  • Has lasted for at least that long.

  • Can be expected to result in death.

I am a disabled veteran. Am I eligible for a discharge?

Yes, if you get VA benefits for a service-connected disability and can get VA documentation of one of these:

  • You have a service-connected disability or that is/are 100% disabling.

  • You are totally disabled based on an individual unemployability determination.

If you have VA documentation, you do not need any other medical documentation.

How do I apply for a discharge?

You must fill out a Discharge Application. You can download the Discharge Application form or you can also apply online at https://secure.disabilitydischarge.com/registration.

You fill out sections 1 and 3. Your doctor fills out section 4.

You sign and date at the bottom of section 3. The doctor signs at the bottom of page 2, prints their name, and puts their medical license number.

The most important part of the application is the doctor’s statement. It must fully explain both:

  • Your condition.

  • Why it leaves you unable to work.

Examples:

  • Your doctor writes that you are unable to stand to work at all and cannot sit for extended periods.

  • Your doctor writes that your mental disability keeps you from being able to show up regularly and routinely for work.

*You must turn your application in within 90 days of your doctor signing off on it.

I get SSI or SSD. Am I eligible for a discharge of my loan?

You may be able to prove your disability if you get SSDI or SSI benefits. You must give the Department of Education a copy of a notice of award of these benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination. If you can do this, you do not need documentation from a doctor.

Where do I send the application?

To the U.S. Department of Education:

U.S. Dept. of Education
TPD Servicing
P.O. Box 87130
Lincoln, NE  68501-7130

If you need help filling it out or have questions, contact Nelnet. Nelnet is the Department of Education’s representative regarding your discharge request. You can reach them at

*Mail your application return receipt requested.

What happens next?

The loan holder or Nelnet might ask your doctor for more info. Let your doctor know about this possibility beforehand. This packet has forms to give your doctor explaining the process.

If the Department determines that you are eligible for a discharge, it will notify you and your loan holder that it has approved your application.

They denied my application. Now what?

The Department will go back to collection activity. Your loan will go back to its former status.

If the Department denies your application, look over your loan discharge application. Make sure you fully filled out the application and put all the needed information in your application. You should submit a revised and completed application for the Department's review if you find that:

  • you did not fully fill out the application OR

  • you left out important information OR

  • you have more medical proof of your condition OR

  • your situation has changed  

If the Department still denies your application after you resubmit it, or if you submitted a fully supported and complete application, you can seek judicial review to challenge the Department's decision. Contact a lawyer to find out if this makes sense in your situation.

The Department determined that I am disabled. Do I get the discharge right away?

Yes. BUT this may not be the end of the issue.

The Department will notify your loan holder in writing:

  • the date of your doctor's certification, or the date the Department received it

  • that the loan holder must assign your loans to the Department for discharge AND a three-year monitoring period

*If you made any loan payments on the discharged loans after the date of your doctor's certification or after the Department got your SSA documentation, the loan holder must refund your payment.

The monitoring period does not apply to veterans who get a discharge based on a determination that you are unemployable due to a service-connected disability.

*The Department may send you a Form 1099-C Cancellation of Debt, saying that the student loan debt was cancelled.  If you get this form, talk to an income tax professional to determine if you owe any tax.

Can the Department take back or cancel the discharge?

During the monitoring period, the Department will cancel the discharge and start collection activity back up on your account at any time within the first three years after it granted you the discharge, if:

  • You work, and you earn more than 100% of the poverty limit for a family of two (in 2013, $15,510) OR

  • You get a new TEACH grant OR

  • You get a new federal student loan OR

  • You do not return any of the loan money that you got pre-discharge within 120 days of the date you got the money OR

  • SSA sends you a notice that you are no longer totally and permanently disabled, or that your disability review will no longer be the five-year or seven-year review period indicated in your most recent SSA notice of award for SSDI or SSI.

If the Department decides to cancel the discharge based on any of the above, it must first send you a notice telling you it plans to do so. The notice must state:

  • The reasons the Department is canceling the discharge and reinstating your loan AND

  • How to contact the Department if you believe they made a mistake in deciding to reinstate your loan AND

  • the date your first payment on the reinstatement of the loan is due

What if my spouse and I consolidate our loans together? 

When you consolidate your loans - either on your own or with a spouse - you give up some rights with respect to the loans. Get legal advice before consolidating. You need to know how the consolidation will affect your rights in your situation. You can discharge consolidation loans only if you meet the conditions for discharge for each underlying loan.

The Department may grant a loan discharge for joint consolidation loans (you and your spouse consolidate your student loans together into one loan) if both you and your spouse qualify for a total and permanent disability discharge. If only one of you qualifies, the Department may grant a partial discharge.

Even if the disabled borrower's portion of the consolidation loan is discharged, both you and your spouse remain jointly and severally liable for the balance of the consolidation loan. If the non-disabled borrower defaults on the consolidation loan, the lender can go after both spouses to collect payment on the loan.

I do not qualify for a student loan discharge. I am still unable to repay my loans. What can I do?

Visit www.studentloanborrowerassistance.org for more general information about what to do when you cannot afford to repay your loans, such as:

  • other loan discharges (including bankruptcy)

  • postponing repayment

  • consolidating your loans so you can try to get a lower monthly payment amount

  • income-based repayment plans

*If you have questions about your specific situation, contact a lawyer for advice or contact CLEAR if you are low-income. (See last section for contact information.)

What if I want more information about student loans?

The National Consumer Law Center's www.studentloanborrowerassistance.org/ has a lot of information.

The Federal Student Aid's website has information about applying for and repaying student loans. Visit them at http://studentaid.ed.gov.

More information on how to get a discharge of your loan due to disability:  hwww.disabilitydischarge.com/Home/

How to find out your federal student loan amount:  www.nslds.ed.gov

 

This publication provides general information concerning your rights and responsibilities. It is not intended as a substitute for specific legal advice. This information is current as of May 2019.

© 2019 Northwest Justice Project — 1-888-201-1014

(Permission for copying and distribution granted to Washington State Alliance for Equal Justice and to individuals for non-commercial purposes only.)

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Last Review and Update: May 06, 2019
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