For current students and recent graduates with student loans, a long-term disability diagnosis can trigger panic. You may wonder how you can manage your monthly repayments if you are no longer physically or mentally capable of working.
Those holding federal student loans may be eligible for a student loan deferment, forbearance, or total and permanent disability discharge (TDP).
Federal student loans have a safety net in place for students facing long-term financial hardship, including programs for those with a disability preventing them from finding meaningful work. A disability is a life-altering event. If you have a long-term disability, explore the following options to defer or discharge your student loans, to better focus on recovery and your health.
Managing Student Loans When You Have a Disability
Disability affects all aspects of one's life, including your financial health. If you are no longer able to work, trying to cover your bills, debts, and other monthly expenses becomes challenging. A crucial first step to getting a handle on your budget is to examine your debt.
Then, if you are facing hardships and you have federal loans, you can apply online for forbearance or deferment. Discharging your student debt in bankruptcy might be possible, but you should consult a qualified bankruptcy lawyer about your situation.
If you have federal student loans and are now dealing with a disability, here’s a closer look at the three options available to you.
Student Loan Deferment
Deferment of a federal student loan is more of a short-term solution, which may not always be the right choice for those with a disability. However, if you expect to make a full or partial recovery within three years and aim to start working again, deferment is a good choice.
Deferment of a student loan means that you no longer have to make payments, including interest payments, during the period of deferment. To be eligible, you must hold one of the following federal loans:
- Direct Subsidized Loans
- Subsidized Federal Stafford Loans
- Federal Perkins Loans
- The subsidized portion of Direct Consolidation Loans
- The subsidized portion of FFEL Consolidation Loans
Speak with your federal student loan servicer about the application process, which generally involves submitting a form and may require documentation. You are eligible if you have a disability because you are unemployed and unable to find full-time employment, or are facing financial hardship. You can defer loan payments for up to three years under this program.
Student Loan Forbearance
Unlike deferment, student loan forbearance requires you to continue making interest payments. Again, it's much more of a short-term solution for student loans with disability. It’s for those that expect to go back to work in the future. You can only receive general student loan forbearance for up to 12 months at a time. Forbearance covers the following federal student loans:
- Direct Unsubsidized Loans
- Unsubsidized Federal Stafford Loans
- Direct PLUS Loans
- Federal Family Education Loan (FFEL) PLUS Loans
- The unsubsidized portion of Direct Consolidation Loans
- The unsubsidized portion of FFEL Consolidation Loans
Students and graduates who experience a financially disruptive event like a disability, qualify under the general forbearance eligibility requirement. These conditions include financial difficulties and medical expenses, both of which apply in the case of a disability.
Total and Permanent Disability Discharge (TDP)
The TDP discharge assists students and graduates carrying student loan debt from having to pay back that debt in the future. It is the only long-term assistance program available for student loans and it completely discharges the remaining debt. Unfortunately, not all loans qualify for this program. You are eligible to apply if you hold one of the following federal student loans (or service obligation):
- William D. Ford Federal Direct Loan (Direct Loan) Program
- Federal Family Education Loan (FFEL) Program
- Federal Perkins Loan
- TEACH Grant service obligation
To qualify, you will need to provide documentation proving your disability status. This can include documentation from the U.S. Department of Veterans Affairs, the Social Security Administration or from a physician. From the Veterans Affairs Department, you will need to provide documentation demonstrating you are 100 percent disabled due to a service-connected event, or a totally disabled employment-service rating.
From the Social Security Administration, you’ll need to prove you receive Social Security Disability Insurance or Supplemental Security Income, and your next review is at least five to seven years later.
A physician needs to confirm that you are “unable to engage in any substantial gainful activity due to a physical or mental impairment” that has lasted for over 60 months and can be expected to continue for another 60 months.
You or your representative can apply for the TDP discharge through their online portal (disabilitydischarge.com), or request the application be mailed out by phone. Keep in mind that if you are approved for the TDP discharge, there is a three-year post-monitoring period. In that time, you will not be able to accept any other federal student loans or have annual earnings above the poverty guidelines in your state of residence. One final point to note, if you were approved for a TDP discharge before Jan 1, 2018, this discharge is considered a taxable benefit.
Coping With Student Loans
Everyone's situation is different. However, it’s extremely important to take proactive action and work with your student loan servicer and maybe even contact an attorney who specializes in student loan debt.
For long-term disability, the best option might be to apply for the total and permanent disability discharge. While there are some conditions of eligibility and restrictions during the three-year post-monitoring period, it is the only program which discharges the loan entirely.
For short-term disability status, both the deferment and forbearance programs help provide financial relief from loan repayment. Both programs have a time limit, three years and 12 months respectively, but even 12 months without the full burden of monthly repayments can help during a financial crisis caused by a disability.