U.S. Will Forgive Student Debt of Severely Disabled Borrowers

The Obama Administration has taken steps to erase $7.7 billion in federal student loans owed by nearly 400,000 totally and permanently disabled Americans.

At a time when outstanding student debt has topped $1.3 trillion, the Obama Administration has taken steps to erase $7.7 billion in federal student loans owed by nearly 400,000 totally and permanently disabled Americans. It plans to do so under the 2012 regulatory changes to the total and permanent disability (TPD) discharge process.

A TPD discharge relieves you from having to repay a William D. Ford Federal Direct Loan (Direct Loan) Program loan, Federal Family Education Loan (FFEL) Program loan, and/or Federal Perkins Loan (Perkins Loan) Program loan or complete a TEACH Grant service obligation on the basis of your total and permanent disability. Before your federal student loans or TEACH Grant service  obligation can be discharged, you must provide information to the U.S. Department of Education (ED) to show that you are totally and permanently disabled. ED will evaluate the information and determine if you qualify for a TPD discharge.

ED has been working closely with the Social Security Administration to complete a data match to identify federal student loan borrowers who also receive disability payments and qualify for loan forgiveness under the TPD discharge program. Beginning on April 18, 2016, borrowers who were positively identified in the match will receive a customized letter explaining that they are eligible for loan forgiveness and the simple steps needed to receive a discharge.


You can show that you are totally and permanently disabled in one of the following three ways:
1. If you are a veteran, you can submit documentation from the U.S. Department of Veterans Affairs (VA) showing that the VA has determined that you are unemployable due to a service-connected disability.
2. If you are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you can submit a Social Security Administration (SSA) notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination.
3. You can submit certification from a physician that you are totally and permanently disabled. Your
physician must certify that you are unable to engage in any substantial gainful activity by reason of 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;
• Can be expected to last for a continuous period of not less than 60 months.


In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs (IRS Tax Topic 431).

While the President’s 2017 Budget proposal seeks to exclude TPD discharges and other Department of Education loan forgiveness programs from taxable income, unless Congress acts, loans discharged under the TPD program may be subject to taxation, depending on the specific circumstances of the borrower.•

This column has a simple purpose, but a difficult goal: discuss issues that affect the lives, well being and state of mind of those who must live and cope with a disability and do so in a humorous way whenever possible. This isn’t an easy thing to do, since there’s certainly nothing funny or humorous about being disabled, or in the difficulties and obstacles that those with chronic disabilities encounter daily. However, I’ve personally found that humor has to a great extent helped me cope with my disability (I’ve had Multiple Sclerosis for 45 years and use a wheelchair), and I hope this column helps others in the disability community do so as well.

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