Permanent and total disability student loan forgiveness

Student loan borrowers who qualify as totally and permanently disabled may receive an automatic discharge of their federal student loans. As a result, some borrowers will no longer need to send in an application to have their loans discharged.

In August of 2021, the Department of Education changed the rules around loan discharges for individuals with disabilities. Anyone with a disability as recognized by  the Social Security Administration, or SSA, will have their loans automatically discharged through a data match. A similar system has been in place since 2019 for those whose disabilities are recognized by the Department of Veterans Affairs, or VA.

If your disability is not on file with the SSA or VA, you will still need to apply for a disability discharge of your student loans.

At the time of the rule change, there were 323,000 borrowers with disabilities who received automatic loan discharges. Future borrowers with total and permanent disabilities on file with either the SSA or VA will automatically qualify, but they can opt out if they prefer to do so.

For those that do receive a loan discharge under the program, there won’t be any federal taxes owed on the forgiven loans (through Dec. 31, 2025) but there may be state taxes to pay.

What is a disability discharge?

Total and permanent disability discharge is a type of student loan forgiveness for borrowers who cannot work due to a physical or mental impairment.

To be granted forgiveness, you have to prove that you’re unable to work (characterized as substantial gainful activity) due to a physical or mental impairment.

As of Aug. 16 a total of $9 billion in debt has been discharged for more than 425,000 borrowers with a total and permanent disability.

Disability discharge rules during COVID

Typically borrowers must provide annual earnings documentation for three years after discharge. If your annual earnings exceed state poverty guidelines for a family of two (regardless of actual family size) your loans can be reinstated.

However, the Department of Education announced on March 29, 2021 that it would not require borrowers undergoing post-discharge monitoring to submit annual earnings documentation during the COVID-19 emergency. The change is retroactive to March 13, 2020 and ensures borrowers will not have their loans reinstated for failure to provide earnings information — the reason most reinstated discharges occur, according to the education department.

That policy, the Education Department said in August, will be extended indefinitely. The department also aims to completely eliminate the three-year monitoring period currently mandated by law.

What’s needed for total and permanent disability discharge

Depending on your situation, you must supply documentation to support your claim from the U.S. Department of Veterans Affairs, the Social Security Administration or a physician. Here’s what you need from each:

From the U.S. Department of Veterans Affairs: The VA provides documentation to show you’ve received a VA disability determination stemming from your time in service. The process is automatic, but you can opt out. One reason you might opt out is if your state considers the amount discharged as income and the cost outweighs the benefit. Find out from your state tax office.

From the Social Security Administration: Similar to the VA, the Education Department uses a data match with the SSA to identify any federal student loan borrowers with total and permanent disabilities. You can also opt out of this discharge if the costs outweigh the benefits.

From your physician: Your physician must sign your application and provide documentation to back up the claim that your impairment meets at least one of the following requirements:

• It’s expected to result in death.

• It has lasted continuously for a period of 60 months or greater.

• It’s expected to last for a continuous period of 60 months or greater.

Which loans qualify for total and permanent disability discharge?

The following loans can be forgiven under total and permanent disability discharge: federal direct loans, loans through the Federal Family Education Loan Program, Perkins loans and a TEACH Grant that requires a service application.

President Joe Biden (Photo by Drew Angerer/Getty Images)

Here’s how to qualify for $7 billion of student loan forgiveness if you have a disability.

Here’s what you need to know — and what it means for your student loans.

Student Loans

President Joe Biden has canceled more than $17 billion of student loans. (Biden still considering wide-scale student loan cancellation). This includes a new announcement that $7 billion of student loans has now been canceled for 350,000 student loan borrowers with a total and permanent disability. Here’s how you can qualify.

How to get this student loan forgiveness

Beginning during the Obama administration, student loan borrowers with a total and permanent disability could get student loan cancellation through a discharge. However, the biggest hurdle for most student loan borrowers was completing burdensome paperwork. Since becoming president, Biden has been reforming student loan relief. This has included removing administrative roadblocks so that student loan borrowers can access student loan forgiveness more easily. (Biden dropped student loan cancellation from his annual budget). For example, during the Covid-19 pandemic, U.S. Secretary of Education Miguel Cardona waived the requirement to submit proof of income. Previously, student loan borrowers had to demonstrate that their income didn’t exceed the poverty line for a three-year monitoring period. The U.S. Department of Education has committed to working with the U.S. Social Security Administration and the U.S. Department of Veterans Affairs to use data-matching to identify student loan borrowers automatically who qualify for student loan relief. This will help streamline the process of helping student loan borrowers to access student loan forgiveness. (Student loan cancellation may look different than you think).

How to apply for student loan forgiveness for a total and permanent disability discharge

There are three ways to qualify for a total and permanent disability discharge:

1. Veterans: you have a service-connected disability that is 100% disabling or you are disabled based on an individual unemployability rating.
2. Social Security Disability: you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits.
3. Doctor’s certification: A medical doctor can certify that you can’t engage in any “substantial gainful activity” due to a medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months. (Student loan cancellation and the student loan payment pause are confusing. Here’s what to know).

To apply for student loan forgiveness, submit an application and any supporting documentation of your total and permanent disability. If the Education Department contacts you directly based on information received from the Social Security Administration or U.S. Department of Veterans Affairs, then you’re not required to provide supporting documentation showing that you’re totally and permanently disabled. Currently, federal student loan payments are paused through August 31, 2022. However, once student loan payments restart, you won’t have to pay federal student loans while your application for student loan forgiveness is reviewed. (Here’s who won’t qualify for $6.2 billion of student loan cancellation).

If you don’t qualify for this student loan forgiveness, don’t panic. There are many opportunities for student loan repayment. Here are some of the most popular ways to save money:

• Student loan refinancing (lower interest rate + lower payment)
• Income-driven repayment (lower payment)
• Student loan forgiveness (federal student loans)

Student Loans: Related Reading

Here’s who won’t qualify for $6.2 billion of student loan cancellation

New proposal would extend student loan payment pause and cancel student loans

Biden drops student loan cancellation from budget

Student loan refinancing rates just got ridiculously cheap

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