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Guide to Total and Permanent Disability Discharge

5 Prove DisabilityA total and permanent disability discharge permits you to cancel your federal student loan or TEACH grant obligations due to your inherent medical condition.

All borrowers of federal student loans are qualified for seeking the loan discharge.

The various kinds of federal student aid that are eligible for discharge are as follows:

  • Any loan taken under the William D. Ford Federal Direct Loan (Direct Loan) Program
  • Any loan taken under the Federal Family Education Loan (FFEL) Program
  • Any loan taken under the Federal Perkins Loan (Perkins Loan) Program
  • TEACH Grant

According to a report published by the Department of Education’s Office of the Inspector General, 23% of the people who had taken a federal student loan and received the disability discharge began to start working and receive an income just after the discharge was done.

Therefore strict checks are in place to ensure that there are no fraudulent activities taking place. At the same time, the process is as straight forward as possible for people who are genuinely disabled as per the definition in the statuette.

The below article provides all the necessary information required to seek a total and permanent disability discharge.

How can you prove total and permanent disability?

In order to be eligible for this scheme, the borrower can establish total and permanent disability in one of the three ways:

  1. If you are a veteran, you are allowed to submit a documentation from the U.S. Department of Veterans Affairs (VA) mentioning that you are suffering from a service connected disability.
  2. If you are receiving social security disability insurance or supplemental security income benefits you are eligible provided your next disability review is scheduled within 5 to 7 years starting from the date of your most recent Social Security Administration (SSA) disability determination.
  3. You can show a certificate from your physician that certifies that you are not able to engage in any activity that generates an income due to your physical or mental disability. This impairment should have lasted for period of 60 months or is expected to last for a period not below 60 months or in few cases may lead to the death of the individual.

It is important to remember that each alternative mentioned above to prove disability requires additional supporting documentation that has to be provided along with the TPD discharge application.

What steps should you take to apply for total and permanent disability discharge?

In order to apply for TPD, you have to contact Nelnet which helps the U.S. Department of Education with the discharge process.

You can contact Nelnet by phone or email. The contact information is available in their website. After you have communicated to them that you wish to apply for TPD, they will take the below steps:

  • They will send you the TPD application along with all the necessary information required to apply for the TPD discharge.
  • They will identify which of your federal student loan or TEACH grants are eligible for the TPD discharge.
  • They will instruct your loan holders to stop the payment collection for duration of 120 days. You will be excused from making the monthly payments during this period.

The non payment period will provide you with adequate time to complete and submit you TPD application with all the relevant supporting documents.

You must ensure your application reaches them before the completion of 120 days, failing which you will have to start making monthly payments.

If you have taken a federal student loan from multiple loan holders, you will still have to submit only a single application form that will cover all your student loan and TEACH grant obligations.

After receiving your application Nelnet will contact each of your loan holders and inform them about each step of the process.

2 student with ipadWhat is the process for applying for total and permanent disability discharge?

There are 3 convenient options available to you in order to apply for TPD discharge.

  1. Initiate your TPD application online

This option gives you the flexibility to begin your total and permanent disability discharge request within the comfort of your home.

You will be required to provide answers to a set of precise questions. The information provided will be used to partially complete the application which will be sent to you in a PDF file. You can download and print the file for your reference.

You have to fill in details in the section 3 of the application form and attach the necessary supporting documents or enlist the services of a physician to provide details required to complete the section 4 of the application.

Send over the completed TPD application form to Nelner for further processing [PDF]Loan Discharge Application: Total and … – Student Business Services

  1. Download the TPD discharge application

If you wish to complete the application form without any assistance, you can download a blank application form and take a print out of it.

You have to complete sections 1 to 3 and attach all the supporting documents required to discharge your TPD claim or request a physician to fill in the details in the section 4 of the application.

Finally send over the completed total and permanent disability application form to Nelner for further processing.

  1. Request for TPD discharge assistance via phone or email

You can call or email Nelnet and request them to send you the TPD application form through email.

You have to complete sections 1 to 3 of the blank application form and attach all the supporting documents wherever applicable or you can request a physician to fill in the details in the section 4 of the application.

Finally send over the completed total and permanent disability application form to Nelnet for further processing. You can send the completed TPD application form by Email, by post or by fax.

Do you need a representative to apply on your behalf?

If you require a representative to assist you in the process of submitting a TPD discharge claim, then you and your representative are required to complete the Applicant Representative Designation form.

This form should be submitted to Nelnet before beginning the TPD discharge process.

Which type of doctor can provide a certificate for total and permanent disability?

Nelnet will only entertain certificates that have been issued by a doctor of medicine (M.D.) or osteopathy (D.O.). The doctor should have a valid license that permits him/her to practice medicine in the United States of America.

Certificates issued by medical practitioners like chiropractors, herbalists, registered nurses etc are not considered valid.

What happens after you submit the TPD application?

After receiving you TPD application for discharge, Nelnet takes the below three steps to process your application:

  1. It will contact the holders of your federal student loan / TEACH grant and notify them to immediately stop collecting payments.
  2. Nelnet will review your TPD application form along with the necessary documents to ensure that the application is filled out completely with all the required information.
  3. After review if Nelnet determines that your application meets the eligibility criteria, they will forward it to the U.S. Department of Education for the final call.

The process of reviewing the TPD application usually takes a month to complete. But if the application form submitted is incomplete or the supporting documents are missing, the process can be further delayed.

1 higher_education_challenges_todayWhat happens after your claim is approved?

The further course of action depends on the way you have chosen to prove your total and permanent disability.

In each case, Nelnet will request the holders of your federal student loan / TEACH grant to refund any loan payment which was made after the date on which the disability was proved.

If you have submitted a physician’s certification or Social Security Administration documents to establish your TPD discharge claim, you will then be subjected to a 3 year post-discharge monitoring period.

You will be mandated to repay your federal student loan or TEACH grant if during this period, you:

  • Receive annual income from a job that is more than the amount stipulated under the poverty guideline for a family of two members in your state of residence.
  • Receive a fresh loan under any of the federal student loans or TEACH grant programs.
  • Receive funds from a Direct Loan Program or Perkins Loan Program loan or a TEACH Grant that was approved before the loan discharge date and you failed to return the funds to the loan holder within 120 days from the date of disbursement.
  • Receive a notification from the SSA informing you that you are no longer qualified as “disabled” or your continuing disability review will not be within the 5 to 7 year period mentioned during filing for TPD discharge.

If during the course of the post discharge period, there has been any changes in your personal information for example change of residence or phone number, you are obligated to inform Nelnet and update them with the new details.

If you have submitted your claim for TPD discharge based on Veteran affairs documents, then you will not be subjected to the 3 year post-discharge monitoring period.

What happens if your claim is rejected?

If your claim for total and permanent disability discharge has been denied, then you will be informed of the same through a mail. The mail will contain information that led to the rejection of your claim and also provide you with details on how to proceed further.

After your claim has been rejected, Nelnet will notify your loan holders to resume payment collection.

You are allowed to appeal against the rejection by providing additional documents that will support your eligibility claim.

If you appeal within one year of rejection, then there is no need to submit a fresh application. But if you wish to appeal after one year of rejection, then you have to start the process from the beginning by submitting a fresh application.

What is the downside of discharging your loan through TPD?

There is no doubt that TPD provides relief to people who are not able to work and pay off their loans. But the tax implications of TPD may add to your troubles.

At present the U.S. Department of Education will notify the discharge of any loan that exceeds the limit if $600 to the internal revenue service. If your loan has been discharged, you will receive Form 1099-C that will mention the amount of debt forgiven.

This amount has to be mentioned in your tax return and is considered as taxable income. Therefore it is in your best interests to speak to a professional tax consultant who will be able to assess your financial situation before filing the claim for TPD discharge.

If your tax obligation is very steep, you may wish to opt for income driven repayment plan as these plans have a repayment period of 20-25 years. In this way you can postpone any possible tax obligations for a long time.

Conclusion

In April 2016 U.S. Department of Education announced a new process that will proactively identify borrowers who qualify for total and permanent disability (TPD) loan discharge.  This initiative is a call by President Obama towards providing easy and fair experience for thousands of Americans to pay their federal student loan.

From April 18, 2016, borrowers who are identified by the federal government as a match will receive a letter that informs the borrower that he/she is eligible for seeking forgiveness of loan. The letter will also explain the simple steps required to be followed for receiving the discharge.

The borrowers who have been identified by the new process do not have to submit documents required to prove their eligibility. This streamlined process is sure to reduce the hardships of the borrowers.

The below table provides a better picture for your understanding.

Criteria

TPD 2016

TPD 2012

Eligibility

Borrowers who are eligible are identified by the government on a pro active basis. Borrowers have to send the TPD application form to Nelnet to determine their eligibility

 

Documentation

Few documents are required as borrowers do not have to submit documents for showing eligibility

 

Documentation is more as borrowers have to submit documents for showing eligibility

 

Risk of fraud

Low

 

High

 

Process flow

Streamlined process

 

Time consuming process

 

The President’s 2017 budget proposes to remove TPD discharges and other student loan forgiveness plans from the federal taxable income category.

With so many positive initiatives being undertaken, there is no doubt that borrower’s who have the qualification for it, will use the total and permanent disability loan discharge option for seeking respite.

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