Does Being on Disability Get Me Out of Paying Student Loans?

Does being on disability relieve you of the obligation to pay your student loans? Maybe. If you have federal student loans, you could be eligible for a "total and permanent disability" (TPD) discharge. A loan "discharge" is basically the same as loan forgiveness or loan cancellation—after your federal student loans are discharged, you're no longer on the hook for paying them.

However, any private student loans you have might not be dischargeable even if you're disabled.

Discharging Your Federal Student Loans Because of a Disability

The federal student loan program offers a TPD discharge for disabled people who meet specific qualifications. In most cases, to qualify for a discharge, you can't have had the injury or illness when you signed up for the loan.

If you had the disability when you got the loan, you might be able to cancel your debt if you can show a substantial deterioration of your condition.

Loans Eligible for a TPD Discharge

Federal Direct Loan Program, Perkins Loans, and the Federal Family Education Loan (FFEL) Program are eligible for a TPD discharge. Also, Teacher Education Assistance for College and Higher Education (TEACH) grants, which require you to complete a service obligation, can be discharged.

Borrower Eligibility for a TPD Discharge

To qualify for a TPD discharge, you'll have to show you can't do any "substantial gainful activity" (work that involves doing significant physical and/or mental activities) because 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, or can be expected to last for a continuous period of not less than 60 months. (20 U.S.C. § 1087 (2024).)

How to Qualify for a TPD Discharge

You can get a TPD discharge if you apply and your doctor or licensed medical professional certifies you meet the definition of totally and permanently disabled above. However, if you get disability benefits from the Social Security Administration (SSA) or the Department of Veterans Affairs (VA), you could get an automatic discharge.

Getting a TPD Discharge Based on a Licensed Medical Professional's Certification

You can get a TPD discharge if your doctor or another healthcare professional certifies that you're totally and permanently disabled. Your health care provider must certify that you're unable to engage in any substantial gainful activity because of a medically determinable physical or mental problem that, as noted above, can be expected to result in death, has lasted for a continual amount of time that's not less than 60 months, or can be expected to last for a continual amount of time that's not less than 60 months.

The health care provider who fills out the form must be licensed to practice and must be a:

• doctor of medicine (M.D.)
• doctor of osteopathy/osteopathic medicine (D.O.)
• nurse practitioner (N.P.)
• physician's assistant (P.A.), or
• certified psychologist at the independent practice level. (34 C.F.R. § 685.213 (2024).)

You'll have to complete an application to get a TPD discharge this way.

Getting a TPD Discharge If You Receive SSDI or SSI

In 2023, the Department of Education announced that many totally and permanently disabled student loan borrowers would get automatic discharges of their federal student loans through a data match with the SSA unless they opt out of the process. So, if you're getting Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you might get an automatic discharge after the SSA provides information to the Department of Education. You'll get a letter notifying you that you're getting for a TPD discharge unless you opt out.

You can get a TPD discharge if:

• Your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination.
• Your next continuing disability review has been scheduled at three years.
• Your disability onset date (for SSDI or SSI) was five years ago or earlier.
• You've been receiving SSDI or SSI for disability for five years or more.
• You were approved for disability benefits due to a compassionate allowance.
• You are currently receiving SSA retirement benefits, and immediately before you qualified for retirement benefits, you met one of the requirements described in the bullet points above. (34 C.F.R. § 685.213 (2024).)

Each quarter, the U.S. Department of Education runs a match with the Social Security Administration to determine who's eligible for a discharge and automatically cancels the loans of those who qualify.

However, even if you get SSDI or SSI, you might not automatically be eligible for TPD discharge. If the Education Department gets information from SSA that indicates you might qualify, it will contact you and explain how to apply for a TPD discharge. Additionally, you can apply on your own for TPD discharge if you're receiving SSDI or SSI benefits.

TPD Discharges for Disabled Veterans

The U.S. Department of Education automatically forgives federal student loans for eligible disabled veterans' debts through a match program with U.S. Department of Veterans Affairs (VA) unless they opt out. To qualify, you must have a service-connected disability (or disabilities) that is 100% disabling, or you must be totally disabled (100%) based on an individual unemployability rating.

You'll get a letter if the Department of Education determines you qualify for a TPD discharge. If you don't get a letter and think you have an eligible VA disability determination, you can submit a TPD discharge application.

How to Apply for a TPD Discharge

If you haven't received an automatic discharge letter, you may apply directly to the Department of Education through an online system. You'll submit one application for all of your federal student loans. You can also submit an application by mail or email. Nelnet, a loan servicer, assists the U.S. Department of Education in administering the TPD discharge process.

If you notify the Department that you plan on applying for a disability discharge, the Department will tell your loan holders to suspend collection activity for up to 120 days. So, you won't have to make payments for up to 120 days, which gives you time to complete and submit the discharge application. After you submit your application, the Department will contact your loan holders and tell them to suspend collection activity on your loans for, again, up to 120 days.

However, the suspensions don't apply to wage garnishments or Treasury offsets. But if the Department approves your request for a discharge, the wage garnishments or tax offsets will be discontinued.

What Happens If Your TPD Discharge is Approved?

What happens after you receive a discharge generally depends on how you show that you're totally and permanently disabled.

If the Department approves your request because you submitted (or it received) SSA documentation or a physician certification, you'll be discharged from making further payments after the date the Department originally received the documentation used to approve your request. But you'll be subject to a three-year post-discharge monitoring period starting on the date the discharge is approved. During these three years, your loans can be reinstated, if either of the following are true:

• You receive a new federal loan or TEACH grant.
• You receive a notice from Social Security stating that you're no longer disabled or that your scheduled review no longer meets the required review period discussed above.

Then, you'll have to repay your discharged loans but not the interest that would have accrued when your loans were discharged. In the past, you also had to provide information about your earnings, and, if you earned too much, your loans could be reinstated. However, the Department of Education indefinitely extended its policy, which it instituted during the COVID pandemic, of no longer asking borrowers to provide information about their earnings. After the three-year monitoring period expires, the discharge becomes permanent.

The three-year post-discharge monitoring period for other borrowers doesn't apply to borrowers who are approved for a TPD discharge based on a determination of employability by the VA due to a service-connected disability.

Do I Have to Pay Taxes on a TPD Discharge?

The IRS generally treats the amount of a discharged loan as income to you, meaning you'll have to pay taxes on it unless you qualify for an exception or exclusion. However, under the Tax Cuts and Jobs Act, if a student loan borrower becomes permanently disabled, the forgiven amount is excluded from taxable income for federal purposes. This exclusion is applicable after December 31, 2017, but will not apply to discharges after December 31, 2025, if Congress doesn't renew it. Also, the American Rescue Plan Act exempts student debt forgiveness from federal taxation until January 1, 2026.

Some states might consider forgiven student loan debt as taxable income, even if the federal government doesn't.

Alternatives to a TPD Discharge

If you don't qualify for a TPD discharge, you might consider selecting an income-driven repayment plan for your federal student loans. Or you could look into getting a deferment or forbearance, which are temporary options for borrowers having trouble making payments on their federal student loans.

Discharging Private Student Loans

Private student loans (those from a bank, credit union, or another type of private lender) have their own rules about discharging a debt due to a borrower's disability. Some private lenders will agree to forgive student loan debt if a borrower becomes disabled.

To find out about cancellation options for private student loans, contact your loan servicer to determine if the lender has a disability cancellation policy.

Learn More About TPD Discharges

To find additional information about TPD discharges, go to the U.S. Department of Education's Federal Student Aid website or https://www.disabilitydischarge.com.