Total and Permanent Disability Discharge

Federal student loans and TEACH Grant service obligations may be discharged if the borrower becomes totally and permanently disabled.

Total and permanent disability is not the same as Social Security disability, which can include short-term or temporary disability status. Some borrowers who are receiving Social Security disability benefits do not qualify for a total and permanent disability discharge. However, some forms of Social Security disability status are more permanent in nature and may be considered the equivalent of a total and permanent disability.

Total and permanent disability occurs when the borrower is unable to engage in substantial gainful activity because of a physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for at least 60 months (5 years).

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Have you been employed for at least 2 years?
Do you currently have a credit score of at least 680?
Have you defaulted on your current loans?*

* Default = 270 days late/missed payment on a federal loan and typically 90 days late/missed payment on a private loan (contact your lender for exact definition of default).

There are three ways to demonstrate total and permanent disability:

  • Veterans may provide documentation from the U.S. Department of Veterans Affairs (VA) that indicates that the borrower is unemployable due to a service-related disability.
  • Borrowers who are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) may, in certain circumstances, be considered as having a total and permanent disability. These borrowers should submit documentation showing that the next scheduled disability review by the Social Security Administration (SSA) will occur 5 or more years after their most recent disability determination. This documentation may appear on the SSA notice of award. It may also be obtained by calling the SSA at 1-800-772-1213 (or TDD/TTY 1-800-325-0778) and requesting a Benefits Planning Query.
  • Borrowers may provide certification from a licensed U.S. physician (M.D. or D.O. only) that they are unable to engage in any substantial gainful activity because of a medically-determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for at least 60 months (5 years). The physician’s certification must be submitted within 90 days of the date the physician signs the discharge application.

Borrowers (or their designated representatives) may apply for a total and permanent disability discharge at www.disabilitydischarge.com. This website is operated by Nelnet under contract to the U.S. Department of Education. A borrower or borrower’s representative may notify Nelnet of their intention to apply for a total and permanent disability discharge by calling 1-888-303-7818 or by sending email to DisabilityInformation@Nelnet.net. After the borrower or borrower’s representative contacts Nelnet, collection activity on the borrower’s loans will be suspended for 120 days while the discharge application and supporting documentation are collected, submitted and reviewed.

If a borrower’s application for a total and permanent disability discharge is approved, any loan payments made after the borrower’s disability date will be returned to the person who made the payments. The disability date is usually the date of the physician’s certification of the discharge application, the date the SSDI/SSI documentation was received by the contractor or the date the VA determination of a service-related disability.

Borrowers who receive a total and permanent disability discharge will receive an IRS Form 1099-C, Cancellation of Debt, if the amount discharged was $600 or more. IRS Form 1099-C treats cancelled debt as income to the borrower, who must then pay income taxes on this income. (There are exceptions to the treatment of canceled debt as income for bankruptcy discharge and insolvency.)

After the debts are discharged, there is a 3-year post-discharge monitoring period. If certain events such as those described below occur during the monitoring period, the loans will be reinstated. This monitoring period does not apply to loans that were discharged based on a veteran’s service-related disability.

Events that may lead to reinstatement of debts that were discharged due to a total and permanent disability include:

  • The borrower has annual earnings from employment that exceed 100 percent of the poverty line for a family of two in the borrower’s state during the monitoring period. The restriction is based on a family of two regardless of the borrower’s actual family size. Annual earnings are measured starting with the date of the total and permanent disability discharge and do not include any earnings prior to that date. Disability benefit payments, retirement income and investment income are not considered to be earnings from employment.
  • The borrower receives a new federal student loan or TEACH Grant. This restriction ignores federal consolidation loans that include only federal education loans that were not discharged.
  • The borrower failed to return a disbursement on a federal student loan or TEACH Grant that was received prior to the date of discharge within 120 days of the disbursement date
  • The borrower receives a notice from the Social Security Administration (SSA) revoking their status as totally and permanently disabled or changing the disability review period from 5 or more years to less than 5 years.
  • The borrower fails to comply with requests for information from the U.S. Department of Education, such as failing to notify the U.S. Department of Education of changes in the borrower’s address or telephone number or failing to provide documentation of annual earnings from employment.

Borrowers who receive a total and permanent disability discharge may not receive new federal student loans or TEACH Grants unless they receive certification from a physician that they are able to engage in substantial gainful activity and they sign a statement acknowledging that they cannot get a future total and permanent disability discharge based on a current disability unless the disability deteriorates significantly.

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