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 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|2.25% – 6.59%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%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 June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
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 SoFi.
Fixed rates from 2.49% APR to 6.94% APR (with autopay). Variable rates from 2.25% APR to 6.59% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 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 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.
8 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. 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.