Disability Student Loan Forgiveness: What to Know

If you are completely and permanently disabled, you may qualify for student loan forgiveness.

When your student loans are paid off due to disability, you may be limited in whether you can work or go to school for a period of time. Otherwise, your student loans may be reinstated.

This can be an especially difficult issue if you’re paying off your loans while you’re attending school or planning to. This can happen even if you never planned to seek discharge from the hospital due to disability.

Here’s what to know about disability forgiveness, and how to navigate your choices if your loans are automatically forgiven.

Federal student loans may be forgiven if the borrower has total and permanent disability (TPD).

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Eligible loans include:

• All loans in the William D. Ford Federal Direct Loan Program (Direct Loans)
• Federal Family Education Loan Program (FFELP)
• Federal Perkins Loan Program
• Federal Stafford Loans
• Federal loans for parents
• Federal Grad PLUS Loans
• Federal consolidation loans
• The TEACH Grant Service Commitment is also eligible for TPD discharge.

There are three ways to qualify for a TPD discharge:

If a TPD discharge is approved, payments made on or after the date of deficiency will be returned to the borrower. The date of disability is the date disability was determined by the Department of Veterans Affairs, the date the U.S. Department of Education received award notification documentation from the Social Security Administration (SSA), or the date of physician certification.

Nearly half of private student loans have disability forgiveness similar to TPD forgiveness for federal education loans, albeit without automatic forgiveness based on a VA or SSA determination.

The TPD is automatically selected by VA or SSA through quarterly data matching between the US Department of Education and these federal agencies. Borrowers who qualify for a TPD discharge through data matching do not need to apply for a TPD discharge or provide documentation to determine their disability.

Borrowers can opt out of automatic discharge. If the borrower opts out, they can apply for a TPD discharge later. Sometimes, a borrower will delay requesting a TPD discharge to ensure payment of all of their federal education loans or because they are concerned about their state income tax liabilities.

If a borrower does not receive disability forgiveness through the automated process, they can also qualify by submitting a TPD forgiveness application along with documentation of the VA or SSA decision. For the SSA, documentation can include:

• A copy of the SSA notice of SSDI award
• Benefits of SSI
• Benefits Planning Inquiry (BPQY Form 2459) indicating that the next disability review will be within 5-7 years of the date of the most recent disability determination under the SSA.

To obtain a TPD discharge through a doctor’s certificate, the borrower must submit an application with a doctor’s certificate in Section 4.

The application can be obtained in the following ways:

The application can be submitted by a borrower representative, but borrowers must submit an application Applicant representative appointment form Firstly. A power of attorney is not enough.

The federal government requires disabled borrowers, who may not be able to complete the form because of their disability, to submit a form so that someone else can complete the form for them.

While the TPD discharge request is being processed and verified, the borrower’s loans will be placed in forbearance for up to 120 days.

An actual disability discharge requires only two pages to complete:

The One Big Beautiful Bill made disability student loan forgiveness permanently tax-deductible.

Disability discharges may also be subject to state income tax in some states.

If a borrower receives a TPD discharge due to an SSA decision or physician certification, the borrower will be subject to a three-year post-discharge monitoring period beginning on the date the discharge is approved. Borrowers who qualify for a TPD discharge due to a VA determination are not subject to a three-year post-discharge monitoring period.

As of July 1, 2023, the monitoring period no longer monitors income, but rather new financial aid.

The repayment obligation will be reinstated if the borrower obtains a new federal education loan or TEACH grant during the post-exit monitoring period. If the borrower receives a payment from a previous Federal Education Loan or TEACH Grant during the post-exit monitoring period and does not return it within 120 days of the disbursement date, the repayment obligation will be reinstated.

It is important to note how the probation period affects the actual discharge date. If you get disability forgiveness from the VA, there is no monitoring period, so the effective date your student loans are forgiven is the date you get it.

However, if you are on probation (SSA and physician determination), the effective date of getting off disability is when your probation ends.

As noted above, borrowers who obtain a new federal education loan or TEACH grant during the three-year monitoring period after discharge will have their repayment obligation restored.

Borrowers can continue their enrollment in college or return to school during the three-year post-discharge monitoring period. However, if they do not want to repay their commitment, they cannot request a new federal education loan or TEACH grant during the post-discharge observation period.

After the three years are up, the borrower can get a new federal education loan or TEACH grant without repaying the repayment obligation. Borrowers who qualify for a TPD discharge due to a VA decision can also take out new federal education loans immediately and TEACH grants without reinstating the repayment obligation, since loans discharged due to a VA decision are not subject to a post-discharge monitoring period.

However, to obtain a new federal education loan or TEACH grant, the borrower must obtain certification from a doctor that he or she is able to engage in significant gainful activity, even if there is no observation period after discharge from the hospital.

The borrower must also acknowledge that a new Federal Education Loan or TEACH Grant service obligation cannot be forgiven based on the borrower’s current disability unless the borrower’s condition has deteriorated sufficiently for total and permanent disability to occur.

Note that the same rules apply to parent borrowers of Parent PLUS loans, if the original borrower previously had federal education loans that qualified for a TPD discharge. Only a Parent PLUS Loan borrower can receive loan forgiveness due to the borrower’s disability. If the student on whose behalf the Parent PLUS Loan was borrowed becomes disabled, the Parent PLUS Loan will not be discharged.

Typically, a student with a disability waits until he or she graduates or leaves college to apply for a TPD discharge.

Discharging the TPD does not affect a student’s eligibility for other federal student aid, such as the Federal Pell Grant or the Federal Supplemental Educational Opportunity Grant (FSEOG).

Vocational rehabilitation assistance does not affect eligibility for federal student aid.

If vocational rehabilitation assistance does not fully cover expenses related to a student’s disability, the college financial aid director may include these expenses in the student’s cost of attendance. This move could result in an increase in the student’s demonstrated financial need.

ABLE accounts are not reported as an asset on the Free Application for Federal Student Aid (FAFSA).

The rules for discharge from total and permanent disability are set out in the regulations as follows:

• Federal Perkins Loan Program. 34 CFR 674.61(b) and (c)
• Federal Family Education Loan Program. 34 CFR 682.402(c)
• Federal Direct Loan Program. 34 CFR 685.213
• Grant education. 34 CFR 686.42(b)

These regulations are based on the statutory language at 20 USC 1087 and 20 USC 1087dd(c)(1)(F).