Can Student Loans be Forgiven for Disability?

Question: I’m disabled. Am I still responsible for my student loan debt? – Julie N. in Florida

Andrew Pentis, personal finance expert and certified student loan counselor at Student Loan Hero, responds…

Dear Julie,

Being disabled can in fact qualify you for student loan forgiveness on your federal student loans, and perhaps even on your private loans too.

Unfortunately, you’ll have to clear some red tape to receive it.

The severity of your disability (for federal loans) and the generosity of your lender (for private) are among the factors that could decide your fate.

How to discharge federal student loan debt because of disability

There are several ways to remove or receive forgiveness on your federal education debt, including what the Department of Education (DoED) calls “Total and Permanent Disability Discharge.”

That’s defined as any physical or mental impairment that has or will last five years or which could result in death. A licensed physician, the Social Security Administration or the Department of Veterans Affairs must certify your disability on your discharge application.

To apply (or to have a trusted representative do so on your behalf), visit the DoED’s specialty website, DisabilityDischarge.com. Nelnet, the federal loan servicer that handles claims, will pause your payments for up to 120 days, although it typically takes less than 30 days to review your application.

If your disability falls short of the “total and permanent” mandate, you’re not entirely out of options. You could request a deferment or forbearance — usually for up to 12 months, though possibly as long as three years, especially if your disability has damaged your personal finances.

Pausing your repayment isn’t a perfect solution: Your debt won’t go away, and it will continue to accrue interest (at least on your unsubsidized loans). Still, it could at least give you some breathing room while you focus on your health.

Explore private student loan cancellation options in cases of disability

Refinance Student Loans

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The path to loan forgiveness for disability isn’t as clear-cut in the world of private student loans. It all hinges on the bank, credit union or online company from which you borrowed.

Consult your loan agreement or phone your lender to learn about its policy. Discover, Sallie Mae and Wells Fargo are among those that offer loan forgiveness when the primary borrower suffers a designated permanent disability. Be prepared to document your disability for your lender.

If your lender isn’t so forgiving, ask about its other forms of support.

Your disability might be stopping you from earning your regular income, for example. In that case, you could apply for your lender’s economic hardship forbearance or unemployment protection program (if it has one).

A forbearance would only temporarily pause your payments — not forgive them — but it’s a start. Still, keep in mind that interest will continue to accrue on your loan balance while you take a break from repayment.

If your disability isn’t stopping you from keeping pace with your loans, you might gauge your fit for the more permanent solution of student loan refinance. With a healthy credit score (or a cosigner who has one), you could consolidate your debt and lower your overall interest rate, saving potentially thousands of dollars over time.

Don’t forget the rules of disability discharge on student loans

Even if you qualify for forgiveness on your federal or private student loans, ask your loan servicer or lender if there are any strings attached.

The DoED, for example, won’t prohibit you from returning to work. However, earning significant income within three years of receiving a loan discharge could reset your repayment. You also wouldn’t be allowed to access federal financial aid (perhaps to go back to school) during the same three-year period without resetting the repayment of your discharged debt.

With private lenders, you might clarify whether your borrowing relationship will truly break, or ask about the affect loan discharge could have on your cosigner (if you have one).

Paying attention to the details of disability discharge will ensure you reap the rewards of loan forgiveness now — and avoid an unwelcome surprise later.