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Nobody wants to think about it, but accidents and illnesses are painfully common. The Social Security Administration (SSA) reported that 25% of 20-year-olds will become disabled before reaching retirement age.
If you can’t work, you will have a hard time making ends meet, let alone your student loan payments. However, there is some potential assistance to borrowers with federal student loans through the Permanent Disability Statement (TPD) program.
Qualified borrowers can apply for the government to forgive their outstanding student loans, excluding their obligation to repay the debt.
What is a statement of complete and permanent disability?
Federal TPD has been available to student loan borrowers since the passage of the Higher Education Act of 1965.
Under this program, federal loan borrowers who meet the government’s definition of “totally and permanently disabled” can receive 100% of the outstanding loan balance.
When you apply, you submit it to Nelnet, the federal loan service that administers the TPD program. If your application is approved, your monthly payments are suspended and you usually enter a three-year monitoring period. If you are still disabled after three years – and you are not expected to recover – and have not received income or loans, the government will forgive you the remaining loan.
Who is eligible for a TPD discharge?
Unfortunately, many people do not realize they are eligible for TPD and are missing out on significant help. According to the National Student Loan Defense Network, approximately 589,000 student loan borrowers have been identified by SSA as eligible for TPD. More than 60% of eligible borrowers did not apply for a TPD, usually because they were not aware of the program or did not understand the application process.
This is why it is so important to carefully study the program criteria. To be eligible for a TPD, you must meet the definition of a full and permanent disability program. Under the Higher Education Act 1965, this means that borrowers must be unable to work due to physical or mental disabilities that are expected to persist for 60 months or more.
Disability information is verified in a variety of ways.
TPD requirements for veterans
If you are a veteran of the U.S. military, you may qualify for a TPD by providing documentation that the Department of Veterans Affairs (VA) has issued you with a disability determination for any of the following reasons:
- You have a service-related disability that is 100% disconnected
- You are completely disabled based on your unemployment rating.
Note: In August 2019, then President Trump signed a presidential memorandum to expand the TPD for veterans. Under the new rules, veterans who have been identified by the VA as completely disabled or disabled due to disability are automatically eligible for a loan repayment through the TPD if they do not opt out.
TPD requirements for social security recipients
The government uses the SSA system to find borrowers who are eligible for TPD. If SSA decides that you are eligible, they will send you a Notice of Eligibility with the following steps. However, SSA may miss you under certain circumstances, or a mail error may prevent you from receiving notification. If this happens, you can apply by completing a Discharge Statement and providing supporting documentation.
If you are getting Social Security Disability or Supplemental Insurance Income, you may be eligible for TPD by submitting a copy of your SSA Payment Notice or Benefit Planning Request that includes the date of your next disability review. To be eligible, your next disability review date must be at least five to seven years from the date of your late SSA disability determination.
TPD requirements for persons diagnosed by a physician
If you are not eligible for TPD under the rules for veterans or social security recipients, you may be eligible if you have been diagnosed by a qualified physician – a Doctor of Medicine (MD) or a Doctor of Osteopathy or Osteopathic Medicine (DO) who is licensed for practice in the USA.
To apply for TPD, your doctor will need to complete part of your discharge application stating that you are unable to work due to physical or mental disabilities that will result in death, have continued consistently in the past 60 months, or are expected to continue the next 60 months in a row.
Which student loans are suitable for TPD?
Borrowers with the following types of federal student loans are eligible for TPD:
- Direct subsidies
- Direct unsubsidization
- Parent PLUS
- GRAD Plus
- Direct Consolidation
- Subsidized Federal Stafford
- Unsubsidized Federal Stafford
- FFEL Plus
- Combining FFEL
- LEARN Grant Service Commitments
if you have private student loans, you are not eligible for the federal TPD discharge program. However, some major private student loan lenders– including Discover, Laurel Road and Sallie Mae – will forgive your balance if you are permanently disabled. Contact your lender directly to find out what their loan forgiveness policy is.
How to Apply for a Disability Student Loan Statement
To start the TPD application process, follow these steps:
- Visit DisabilityDischarge.com. DisabilityDischarge.com is the official website of the TPD program. On the site you can find answers to frequently asked questions and run the application.
- Contact NelNet. Contact Nelnet to advise you of your plan to apply for TPD. Nelnet will temporarily suspend your payments for 120 days to give you time to gather the necessary information and apply. You can contact Nelnet at 888-303-7818 or email email@example.com…
- We collect documentation. You will also need to provide supporting documentation with your application, such as a certificate of disability from your doctor, your SSA disability determination, or VA discharge documents.
- Fill out the application. You can apply online. You will need to print it out to complete, and then you can send the application and supporting documents by mail, fax or email to the Department of Education:
U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501-7130
Email address: DisabilityInformation@Nelnet.net
If approved, you will receive a notification and enter a three-year monitoring period. In any of the following cases, the government will restore your loans and you will have to pay off the debt:
- Your annual earnings from work exceed the poverty rate for a family of two, even if your actual family size is larger.
- You are receiving a new federal direct loan or TEACH grant
- You receive a notice from SA that you are not permanently disabled or that your disability screening will take place prior to the five to seven year screening period that was previously scheduled.
Problems to look out for when using TPD
If you are eligible for a TPD, the program can provide you with significant financial assistance. This will completely save you from debt and take this burden off your shoulders.
However, there are a few things to keep in mind:
If your loans are forgiven through TPD, your borrowing options in the future may be limited.
- After the three-year monitoring period: If you recover and decide to return to school, you will need to send a letter from your doctor stating that you can engage in income-generating activities. You must also sign a statement that says your new loans cannot be forgiven through the TPD as your condition already exists if it doesn’t get worse.
- Until the end of the three-year monitoring period: If you choose to return to school before the end of the three-year observation period, you must resume payments on previously repaid loans. If you have had TEACH grants, you are again responsible for meeting your job responsibilities or repaying the grant in the form of a loan with interest.
The amount paid by the government through the TPD was previously taxed as income for federal tax purposes. However, a new law has been introduced whereby loans made through the TPD on or after January 1, 2018 are not taxed as income for your federal tax return. This rule expires on December 31, 2025, so prospective TPD members may have to pay federal income tax.
Depending on the state in which you live, the amount paid through TPD may be subject to state income tax; therefore, some borrowers who are eligible for TPD are withdrawing from the program. If you are concerned about how a loan forgiveness will affect your tax bill, please consult with tax specialist…
Other options for student loan borrowers
If you have federal student loans but are not eligible for a TPD payment, there are ways to make your debt more manageable:
- Income Oriented Repayment (IDR). If you are applying for IDR plan and approved, the government will grant you a new loan term of 20 or 25 years. Plus, your payments will be recalculated based on your discretionary income, potentially giving you a much lower payment.
- Patience or postponement. With the federal deferral or deferral program, you can temporarily defer your student loan payments. Depending on the circumstances, you can suspend payments for up to three years.
If you are sick or injured and cannot afford your loan payments, contact your loan agent immediately to discuss your options. There may be financial hardship assistance programs that you can use to reduce or suspend benefits while you recover.