If you’re facing a life-changing disability that affects your ability to work and you have student loans, you might wonder, “What next?”
Student loan forgiveness disability programs can help, but there are important things to know. Read on to learn more about what disability discharge is and how to get it.
What is disability discharge?
Disability discharge is when your loans are forgiven due to your disability. If you have federal loans, you can choose Total and Permanent Disability Discharge (TPD). If you have private student loans, getting disability discharge varies.
When your federal loans are forgiven through disability discharge, you’ll no longer have to make payments. Essentially, you’re wiping out your federal student loan debt.
Applying for Total and Permanent Disability Discharge
In order to get disability discharge on your federal loans, you’ll need to submit an application for TPD. Additionally, you’ll need to submit documentation.
Proof of your disability can come from one of the following sources:
- The U.S. Department of Veterans Affairs (VA)
- The Social Security Administration (SSA)
- A physician
The documentation varies depending on which place you’re getting information from. For example, the VA must show that you have a disability determination. The disability must be 100% caused by service-related activity, or you must be considered unemployable.
If you’re currently getting Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), you may qualify for Total and Permanent Disability Discharge if you provide your SSA notice of award or the Benefits Planning Query showing that your next appointment for a disability determination is in five to seven years (or more).
If you go to a physician, the doctor will need to certify that your disability:
- Is expected to result in death
- Has lasted continuously for at least five years
- Or will last another five years
Nelnet is the loan servicing department that manages Total and Permanent Disability Discharge. If you have questions, call Nelnet at 1-888-303-7818. Customer service is available Monday through Friday from 7 a.m. to 2 p.m. (ET), as well as Saturday from 8 a.m. to 7 p.m. (ET). You can send an email to DisabilityInformation@Nelnet.net.
Once you submit your application, you’ll receive information from Nelnet about the process. The good news is that you won’t have to make payments during the application review.
Private loan disability discharge
If you have private student loans and are looking for student loan forgiveness disability discharge, the process is a bit different. There are many private lenders. You’ll need to contact your lender about the policy. Before, there wasn’t a clear route for disability discharge for private loans. But the Tax Cuts and Jobs Act changed that. This piece of legislation was approved in December 2017. While it mostly focused on tax cuts, it also had a small part in student loan reform.
To get started, contact your lender to ask about disability discharge and what the steps are for applying. Get your documentation in order and see if you can put your payments in forbearance while figuring out the process.
What you should know about disability discharge
If you’re looking for student loan forgiveness disability discharge, there are several things you should know. You might wonder if getting your federal loans forgiven through disability discharge will affect your SSDI or SSI benefits. Good news — it doesn’t!
Also, from now until Dec. 31, 2025, student loans that are forgiven won’t be taxed under current IRS rules.
This is a huge change. Before, borrowers received a 1099-C form and had to report the forgiven amount to the IRS since forgiven loans were considered taxable income. If you got six figures of debt forgiven, that could result in a hefty tax bill. If you’re already disabled and can’t work to pay back your debt, it would be difficult to pay an unexpected tax bill like this.
However, here’s the caveat: The amount that’s forgiven may still be considered taxable by the state. Consider contacting a tax professional to get more information.
Get started with disability discharge
If you’re interested in pursuing student loan forgiveness disability discharge options, start by looking through the eligibility requirements. Once you’ve determined that you qualify, get your preliminary appointments set so you can get the disability designation to have your loans discharged.
Just make sure to talk to your loan servicer or lender during this time to determine if you still need to make payments or not. Additionally, for now, there are no federal tax consequences, but there still may be state tax bills to deal with. Knowing this ahead of time can help make the process easier.