Permanent Disability Forgiveness of student loan debt is available if borrowers are unable to work due to either physical or mental illness or injury. This impairment must show that the person is not likely to improve or recover. The discharge of the debt would provide relief by removing the debt completely. It is up to the borrower to prove to the Department of Education they are permanently disabled. There are Qualifications for a total permanent disability discharge, although the criterion is not too difficult to prove if the injury is in truth.
The Criteria for Proving Permanent Disability
If a disability exists, and the borrower needs absolute relief from student loan debt, the following criteria must be established for the Department of Education (DOE).
- The borrower’s physician has determined he or she is permanently disabled, and unlikely to be able to engage in employment. This is a certified statement submitted from the physician to DOE. In the statement, the physician needs to state what your disability is, how long it is expected to persist, and if employment is possible. Also, if the disability has lasted for at least 60 months, or can be expected to last at least 60 months, or result in death.
- If the borrower is receiving a notice of award for SSDI or SSA, it can be submitted to DOE. It must show a review date of no less than 5 years from the date of the Social Security Administration disability determination.
- Veterans can submit documentation through the U.S. Department of Veteran Affairs to prove disability due to a service- related injury.
The Permanent Disability Loan Forgiveness Process
The Department of Education has developed a more fluent disability discharge process for borrowers’ medically needing student loan relief. The online application can be found here. After submission, the entire process can be followed online.
Once the borrower has completed the submission process to prove permanent disability, the DOE will contact all lenders and stop any collection activity on student loans until the determination has been made. The DOE uses a vendor called NelNet to help locate all the federal loans holders to notify of the loan discharge request. At this point, the loan holders are to hold loans for up to 120 days while the application process is completed. If the application is not submitted within the 120 day time frame, loans go back into the repayment process.
Determination can take anywhere from 60 days up to 5 months depending on volumes of applications received.
If approved, lenders will be contacted by DOE with instructions for a loan discharge. If any payments were made when the disability began, this money will be returned.
If denied, the DOE instructs loan holders to continue collection activity, and a letter is sent to the borrower explain why the loan discharge was denied.
After Receiving Disability Discharge
All borrowers who discharge loans under the permanent disability forgiveness program will be monitored over a three year period. During this time, the DOE can ask for proof that the individual still meets all the criteria for a total and permanent discharge. Veterans who were certified from the Department of Veteran Affairs are exempt from this monitoring.
If the DOE sends requests for information to the borrower, it is important the borrower responds. Regulations have proven that half of the borrowers who were initially approved for disability discharge had failed to respond to DOE during the monitoring period. Their loans were reinstated.
Also, if a borrower signs for new federal loans during this three year time frame, the discharge will be voided and collection will resume again on the loans. The loan balance which is discharged through disability waiver is reported to the IRS as taxable income in the year they are discharged.
Other Options for Student Loan Relief
If denied a full loan discharge through the permanent disability forgiveness program, borrowers have access to other programs for some relief. The William D. Ford Direct Loan Based Repayment program (IBR) may be beneficial to the borrower in these ways.
The IBR Program bases monthly payments on income. If a borrower is disabled and unable to earn an income, the payment can be set at $0.00 per month. Assuming the individual is unable to work, this can be stretched over 25 years and even be in place while a more permanent disability discharge process is actively pursued. The IBR program offers loan forgiveness after the 25 year term.
The IBR calculates payments annually. Any income received will offset the zero payment balance. This also means reapplying for the IBR program annually and submitting income documentation on a regular basis.