I am 57 years old and disabled. Can I get my federal student loans discharged?
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Dear Credible Money Coach,
I have a federal student loan of $169,000 and am 57 years old. I have a disability, but I still work. Can I cancel my loan when I am no longer able to work? —Kimberly
Hello Kimberley and thank you for your email. Your question reminds me that it’s easy to assume that student loan debt is exclusively a millennial problem. That’s far from the truth.
In 2021, 6.4 million Americans between the ages of 50 and 61 owed a total of $281.8 billion in federal student debt, according to statistics from the US Department of Education. Among 2 million people aged 62 and over, the total was nearly 98 billion. And those numbers don’t take into account the private student loan debt that older Americans may have.
If student loan debt is a burden when a person is in their working income years, carry that debt into retirement — or when you can no longer work because of a disability — can be a financial crisis. It makes sense to consider all of your options for dealing with student loan debt, from income-focused repayment plans and refinancing at a lower interest rate, to canceling your debt due to disabilities.
Ways to Get Rid of Student Loan Debt
I believe most people do their best to pay off their student loans. And the federal government offers programs and repayment options intended to help make student loan debt more manageable.
Income Oriented Repayment Plans can reduce monthly federal student loan payments to an amount that fits your budget. Some private lenders also offer flexible repayment options. Unfortunately, repayment plans can extend the time it takes to repay loans.
You can also consolidate federal student loans into a direct consolidation loan, refinance private student loans into a single new loan, or refinance federal and private student loans together. All of these options have pros and cons to consider.
We’ve heard a lot in the media over the past year about student loan forgiveness. Civil service loan forgiveness and other federal forgiveness programs apply to people working in certain civil service jobs, such as the military, civilian police, government work, health care, nonprofit organizations and teachers working in low-income communities. Borrowers must meet certain criteria and requirements to be eligible to have some or all of their federal student loans forgiven under these programs.
Federal student loans can also be discharged if a borrower develops a disability.
Repayment of student debt due to a disability
Kimberley, since you are still working, it appears your disability is only partial at this time. But since you anticipate a day when you will no longer be able to work because of this disability, you may be eligible for federal student loan forgiveness in the future.
The US Department of Education says some federal student loans can be discharged if the borrower suffers a “total and permanent disability.” This release may apply to Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans, as well as TEACH Grant service obligations.
Obtaining a disability discharge is a complex and potentially lengthy process. Here is an overview of the process:
- You will contact the Ministry of Education’s TPD Release Service, Nelnet, by phone or email and request a TPD Release Request. All required federal student loan payments will be paused for 120 days to give you time to submit your application and documents.
- Complete and submit the TPD waiver request along with documentation that demonstrates that you qualify. This documentation may come from the US Department of Veterans Affairs (if you serve in the military), the Social Security Administration, or a doctor.
- If your documentation is from a physician (an MD or DO), your physician will need to certify on the PDT application that you have a physical or mental disability that prevents you from “engaging in substantial gainful activity.” The disability must have lasted at least 60 consecutive months, last at least 60 consecutive months or be fatal.
- Nelnet will review your application and documentation. While your application is being reviewed, you will not be required to make any payments on your federal student loans.
- If your application is approved, Nelnet will notify you that your loans have been discharged. If you made payments after obtaining a VA disability determination, or after Nelnet received SSA or medical documentation of your disability, those payments may be returned to you.
Maintaining your discharge status is easier due to the pandemic
Before the pandemic, borrowers who were not veterans or military would be subject to a three-year monitoring period. During this time, they were required to submit annual documentation of their employment income, and their loans could be reinstated for several reasons, including if their income exceeded the limits or if the SSA determined that they were no longer disabled.
But due to the pandemic, the Ministry of Education suspended the annual income certification requirement effective March 29, 2021. And the ministry restored discharge status to all loans it reinstated on March 13. March 2020 or later, due to inability to certify annual earnings. earnings. This waiver is unlikely to become permanent, but for now it is easier to maintain your discharge status.
Currently, most federal student loan repayments are on hold until May 1, 2022, which may give you more time to get your TPD paperwork in order before submitting your release application. You can find out more about disability leave on studentaid.gov.
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About the Author: Dan Roccato is a clinical professor of finance at the University of San Diego School of Business, personal finance expert Credible Money Coach, published author and entrepreneur. He has held senior positions at Merrill Lynch and Morgan Stanley. He is a recognized expert in personal finance, global securities services and corporate stock options. You can find it on LinkedIn.