If you borrowed student loans for college or graduate school, you probably didn’t envision having to repay them while also staring at a stack of medical bills. But the good news is that you might not have to — thanks to something called student loan disability discharge.
Federal loan holders suffering from a serious physical or mental impairment are eligible to have their debt canceled. For private student loans, however, your pathway to debt forgiveness for disability is unfortunately more limited, though you might have some options, depending on the lender.
What is student loan disability discharge?
The Department of Education promises to cancel your debt (even if it’s in default and collections) if you’ve incurred a “total and permanent disability.”
Think of it as disability insurance, but for your federal student loans. Eligible debt includes:
- Direct loans
- Federal Family Education Loan
- Perkins loans
- TEACH Grant service obligations
Among private lenders, this option is rare, though Sallie Mae, Wells Fargo and Discover are known to discharge your debt in cases of disability. Check with your lender to learn about any support it might be able to offer — even something short of loan cancellation could still be a boon to your repayment.
How do you qualify for student loan disability discharge?
In terms of federal student loans, you must provide evidence of your disability to qualify for disability discharge:
|Licensed physician, who is a doctor of medicine (M.D.) or doctor of osteopathy (D.O.)||Certification of your loan discharge application||Your disability can be expected to result in your death, has spanned at least five years, OR could be expected to last five (more) years|
|U.S. Department of Veterans Affairs (VA)||VA disability determination||You suffered a complete disability while serving or received an individual unemployability rating based on your disability|
|Social Security Administration (SSA)||SSA notice of award or Benefits Planning Query||You’re eligible for Social Security Disability Insurance or Supplemental Security Income|
If the VA or SSA have your disability status up to date, they may contact the Department of Education on your behalf, taking away some of the legwork. The Department of Education would then reach out to request that you complete your discharge application, but you would no longer have to track down the required documentation.
Not eligible for student loan disability discharge?
If you don’t qualify for student loan forgiveness due to disability, explore other options to pay down debt, such as pausing your payments via deferment or forbearance. See what sorts of protections are offered by your private lender.
On the federal loan front, you could:
- Request a deferment of up to three years if your disability has caused economic hardship
- Apply for up to 12 months of forbearance at a time if your medical expenses are getting out of hand
Some private student loan lenders offer relief options too. But note that if you elect to pause repayment, whether with your private lender or with a federal loan servicer, interest will continue to accrue on your loans, increasing your balance by the time you resume payments.
How do you apply for student loan disability discharge?
To get disability discharge, complete a loan discharge application and submit it online — along with your required documentation — to federal loan servicer Nelnet. Simply visit DisabilityDischarge.com and click “Apply Now.”
You can also submit your application by other means:
- Email: [email protected]
- Mail: U.S. Department of Education, P.O. Box 87130, Lincoln, NE 68501-7130
Nelnet will pause your due payments for up to 120 days while your application is under consideration. You can also have someone complete your application on your behalf by filling out the Applicant Representative Designation form.
Applications take as little as 30 days or less to be reviewed; if you’re denied, Nelnet is obligated to explain why, and you can also contact the servicer over the phone at 888-303-7818.
What else should you know about student loan disability discharge?
Receiving a discharge of your federal loans in the case of disability doesn’t prohibit you from working. It does, however, put a temporary cap on how much money you can earn from working.
In fact, your discharge could be revoked during a three-year monitoring period if you report annual income above federal poverty guidelines (or borrow a federal loan or are no longer disabled).
Aside from that restriction, there are plenty of benefit to loan discharge. Here are five that might answer questions coming to your mind:
- No need to pay federal income tax on the forgiven amount if your loans are discharged between 2018 and 2025, thanks to the recently enacted Tax Cuts And Jobs Act (although your state could tax the forgiveness)
- No loan payments necessary while your discharge application is under review
- No effect on your access to Medicaid and Medicare
- Potentially receive refunds on loan payments made after the VA or SSA determined you were completely disabled (and before you received the discharge)
- Potentially return to school and receive federal financial aid once you’re three years removed from receiving the discharge
Disability and student loans don’t have to go together
If you’ve suffered a serious disability, you probably have a lot more on your mind than student loan repayment.
Take some time to gauge your eligibility for loan discharge, however, as it could put an end to your debt — then you’ll be able to focus on more important aspects of your life.