The recent presidential debates had focused some of the public’s attention on the issue of student loan debt burdens. There had been mentions and even promises of measures that would curb the mountain of student loan debt faced by many in the country, especially the Millennial generation. You may have noted there was no mention of the predicament student loan borrowers who have disabilities face. The purpose of this content is to address this omission, and inform the reader of the Total and Permanent Disability (TPD) Discharge.
Eligibility Criteria for the TPD Discharge
Total and Permanent Disability Discharge, or TPD, is a saving grace if you are struggling to pay off your federal student loans, and you have a long-term disability that restricts your ability to work.
With the help of TPD, you’ll be relieved from repaying your federal student loan debt.
To prove your eligibility you can take one of the following steps:
- If you are a veteran, submit documentation from the S. Department of Veterans Affairs (VA) that demonstrates that you are not unemployable because of a service-related disability.
- If you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, submit the Social Security Administration (SSA) notice of award.
- Submit a doctor’s certificate that states you cannot engage in substantial gainful activity due to a medically validated physical or mental impairment that:
- Can result in death,
- Has continued constantly for a period of not less than 60 months, or
- Can last continually for a period of no less than 60 months.
Easier and Fairer
In order to make payments for higher education easier and fairer for millions of Americans, President Obama’s Student Aid Bill of Rights details measures that allows loan forgiveness for borrowers who have a total and permanent disability.
According to the estimates, $7.7 billion student loan debt will be canceled.
How to Apply for Student Loan Disability Discharge
If you think you’re eligible for student loan disability discharge and haven’t received a letter from the U.S. Department of Education, contact Nelnet immediately. Or, you can phone them at 888.303.7818, send an email to them DisabilityInformation@Nelnet.net, or fill out an application.
The Drawback to TPD Discharge
Don’t think that your problems have come to an end after you have applied for student loan forgiveness through TPD discharge. Why? The forgiven student loan debt is taxable income.
If you want to avoid the hefty tax bill, consider choosing an income-driven repayment plan. It could help you to avert tax obligations for a couple of decades. So, whatever student loan forgiveness options you choose, you won’t get tax relief.
If you face any tax problems related to student loan debt, talk to a tax professional and find out a solution.
The TPD Discharge is applicable for people with federal student loans. If you have private student loans, you may not get a complete student loan discharge. In this case, you must talk to your lender regarding forgiving your student loan.
TPD and 2017
The 2017 Budget proposal attempts to exclude TPD discharges from taxable income. But unless Congress acts, the discharged loans will remain subject to taxation (individual circumstances permitting).