Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.
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When you take out student loans, you trust that you’ll eventually make enough money to pay them back. But what if you’re struck by a sudden illness or are involved in an accident that leaves you unable to work? This is where student loan forgiveness for disability comes in.
You may already be aware that this form of relief is out there, but the good news is that it’s become more accessible than ever before, not to mention tax-free (for some, at least). Here’s what you need to know about the student loan disability discharge:
- Federal student loan forgiveness for disability
- Private student loan forgiveness due to disability
- Applying for federal student loan forgiveness for disability
- Problems to watch out for with student loan forgiveness for disability
- Alternatives to student loan disability discharge
If you’re a federal student loan borrower facing long-term disability and can’t work, you may be eligible for student loan forgiveness through Total and Permanent Disability discharge (TPD).
Nelnet assists the Department of Education with this program. To be eligible, you’ll first have to demonstrate that you are totally and permanently disabled. You can do that in one of the following ways:
|What disabilities qualify for student loan forgiveness?|
|1. If you’re a veteran||Submit documentation from the Department of Veterans Affairs (VA) showing that you are unemployable due to a service-connected disability.|
|2. If you’re receiving federal benefits||Submit a Social Security Administration (SSA) notice showing that you are receiving disability insurance or Supplemental Security Income and that your next scheduled disability review will be within five to seven years.|
|3. If you’re otherwise disabled||Submit certification from a physician proving that you are totally and permanently disabled, meaning that you suffer a physical or mental impairment that meets the following criteria:
If you borrowed from a bank, credit union or another private lender, your access to loan forgiveness, even in cases of disability, is likely more limited. However, some lenders will forgive your remaining balance in the case of a disability or death.
If your lender offers this option, be prepared to provide documentation of your disability. Each lender will have a unique application process and qualifying criteria.
|Private student loan lenders that offer student loan disability discharge||Fine print|
|Ascent||● Primary borrower only|
|Citizens Bank||● Primary borrower only
● Parent loan borrowers’ death or disability would transfer the balance to the family’s estate
|College Ave||● Primary borrower only|
|CommonBond||● Primary borrower only|
|Discover||● Primary borrower only|
|Earnest||● Primary borrower only|
|Laurel Road||● Primary borrower only
● Lender may forgive some or all of the debt if the borrower’s permanently disability affects their income
● Only for loans originated after the spring of 2015
|Sallie Mae||● Primary borrower only|
|SoFi||● Primary borrower only
● Disability: Federal loan-like verification standards
● Death: A certified copy of the borrower’s death certificate could be required
|SunTrust||● Primary borrower only|
|Wells Fargo||● Primary borrower only
● Parent loans are forgiven if the student beneficiary is dead or becomes disabled
If you think you meet the requirements of TPD and want to apply for student loan forgiveness due to disability, contact Nelnet about your options. You can call them at 888-303-7818 or email them at [email protected] You can also fill out an application or have someone complete it on your behalf.
(Note that the government is now providing Total and Permanent Disability discharge automatically for those who qualify based on Social Security data. See this government statement for the details.)
When applying for student loan disability discharge via TPD, you’ll be provided with the info you need to fill out the application. Nelnet will then check to see if your loans are eligible for forgiveness. Finally, they will contact your loan holders and notify them that loan payments should be suspended for 120 days.
At that point, you’ll be informed you can stop making payments and should fill out the application and submit it for processing. If you do not hand in your application within 120 days, your student loan payments will resume.
Once you’re finished with your application, you can send it along with any supporting materials to:
U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501-7130
Student loan forgiveness for disability applications are typically reviewed within 30 days. If you’re approved for discharge due to SSA documentation or certification from a doctor, you will be subject to a three-year review period that starts on the date that your discharge is finalized and approved. During the review period, your income and any changes in your status will be monitored.
If you receive approval for the discharge based on a VA determination, you won’t have to take part in a three-year review.
Though student loan forgiveness disability discharge can be a lifesaver for those unable to work and make payments on their student loans, there are a couple of key factors to keep in mind:
Like the borrower defense to repayment program, the federal government’s student loan disability charge initiative hasn’t operated without hiccups.
An NPR investigation published in December 2019 revealed that hundreds of thousands of borrowers (“more than enough to fill a city the size of Pittsburgh”) hadn’t yet received the disability discharge for which they were eligible. To be fair, included in that surprising number are borrowers who had yet to apply.
Here’s another catch: Once you’re approved for a student loan discharge via TPD — and even after you receive it — it could be voided if you fail to meet certain standards during your three-year monitoring period (if you have one).
Your loan balance could reset, for example, if you earn an income above the federal poverty guideline or don’t recertify your earnings annually with Nelnet. The same thing would occur if you return to school and borrow a new federal student loan.
In addition, borrowers who no longer have a permanent disability within the three-year window could lose their discharge.
If your disability discharge was previously revoked
Contact your federal loan servicer. It’s possible your discharge could be returned to you, especially if it was revoked because you failed to provide income documentation during the coronavirus pandemic. The education department announced on March 29, 2021, that no borrowers would have their loans reinstated because of this circumstance.
In the announcement, it was estimated that 41,000 disabled borrowers nationally would see their combined $1.3 billion student loan debt permanently discharged. And an additional 190,000 borrowers would not have to submit details of their earnings during the COVID-19 pandemic to maintain their discharge eligibility.
If you’re a new applicant to TPD (or your private lender’s program)
Ensure you follow its protocols to a T so that your application isn’t delayed, at least on your end.
If you receive forgiveness between 2018 and 2025, you won’t have to fear a big federal tax bill, due to the Trump administration’s Tax Cuts And Jobs Act.
If your student loan disability discharge (and the accompanying Form 1099-C from the IRS) arrived in 2017 or earlier, you’ll still be on the hook for a potentially large tax bill.
One group, however, could be made exempt from this potential tax bill, as a result of the newest legislation. Borrowers who were approved for a TPD discharge in 2015, 2016 or 2017, but didn’t actually receive it until the end of their three-year monitoring period in 2018 or later (when the TCJA was applicable), could be free from Uncle Sam’s grasp.
If you’re unsure of your situation, confirm your discharge award date with Nelnet or consult a tax professional.
If you might qualify for a student loan forgiveness disability discharge down the road, consider that Congress will have to revisit the provision, as it’s set to expire in 2025.
Regardless of whether your discharge is tax-free in the eyes of the federal government, consult your state government’s tax authorities to learn about how it could affect your state income tax.
If you receive a student loan forgiveness disability discharge, your credit report should state that you no longer owe the debt.
However, the Consumer Financial Protection Bureau has said that your credit report could keep your federal loans on the report during the three-year monitoring period (if you’re subject to one). On your report, you may see the notation “assigned to government” before the mention eventually falls off.
The simple act of the debt being forgiven could also change your credit score. After all, your credit mix and amounts owed — two of five credit scoring categories — will be affected by the discharge. Of course, you’d probably rather have your education debt forgiven if it only means a temporary and likely insignificant drop to your credit score.
Dealing with federal and private student loans on top of a long-term disability can be a stressful situation, but there are some options to lessen the burden.
Student loan forgiveness for disability via TPD is a great solution, but before you apply, make sure you meet the requirements. If you don’t, consider other loan-management strategies to ease your repayment, including:
|Deferment and forbearance||You can suspend your loan payments.||Interest will accrue on your balance (except for subsidized loans on deferment).|
|Income-driven repayment (for federal loans only)||It will cap your monthly payment at a percentage of your income.||It will also increase your interest costs.|
|Consolidation and refinancing||You can group your old loans into one new loan, and if you choose student loan refinancing, you may be able to lower your interest rate.||If you refinance federal loans (rather than consolidate them), you’ll lose protections like access to income-driven repayment.|
Know that even if you don’t qualify for TPD student loan disability discharge or similar private lender support, you could still find student loan forgiveness programs that will slash or eliminate your debt balance.
And there are other ways of getting debt-free, even beyond forgiveness — check out our guide to student loan repayment for a look at some of your options.
Andrew Pentis contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2022!
|Lender||Variable APR||Eligible Degrees|
|1.74% – 8.70%1||Undergrad & Graduate|
|1.74% – 7.99%2||Undergrad & Graduate|
|1.74% – 7.99%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|1.74% – 7.99%5||Undergrad & Graduate|
|2.05% – 5.25%6||Undergrad & Graduate|
|1.86% – 6.01%||Undergrad |
|N/A7||Undergrad & Graduate|
|1.99% – 8.38%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 4, 2022.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.
3 Important Disclosures for SoFi.
Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for Navient.
6 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.
7 Important Disclosures for PenFed.
Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
8 Important Disclosures for CitizensBank.
Education Refinance Loan Rate Disclosure: Variable interest rates range from 1.99%-8.38% (1.99%-8.38% APR). Fixed interest rates range from 2.99%-8.63% (2.99%-8.63% APR).
IS Variable Rate Disclosure: Variable Rates advertised are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2021, the one-month LIBOR rate is 0.09%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. Your final variable rate may be based upon the 30-day average SOFR index, as published by the Federal Reserve Bank of New York. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.
ERL Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of May 1, 2022, the 30-day average SOFR index is 0.29%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.
Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.