Q: Is it possible to work and still be eligible for a disability discharge?
A: Even though the government may say otherwise, the answer should be yes. You are allowed to earn less than 100% of the poverty line for a family of two during the three year “watch period” after a final discharge is granted. This allows you to explore whether you can get back in the workforce.
Q. Can I qualify if I have a disability that prevents me from working in the occupation for which I was trained?
A: Not if you are able to work in a different occupation. To be eligible, your disability must make you unable to engage in any type of substantial gainful activity.
Q: Is evidence of a Social Security or Veterans Affairs disability decision sufficient to qualify for a student loan discharge?
A: For V.A., yes, if you have been determined to be unemployable due to a service-connected condition. For Social Security, in some cases, yes as of July 1, 2013. If you are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you can submit a Social Security Administration (SSA) notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within 5 to 7 years from the date of your most recent SSA disability determination as a way of proving eligibility for a disability discharge. You may do this instead of submitting a certification from your doctor.
Q: Does it matter when my disability began?
A: No. Prior to July 2008, doctors signing disability discharge forms had to certify when the disability began. The rules were changed so that doctors must sign that you are disabled as of the date that they sign the form.
Q: Can I apply again if I was denied the first time?
A: Yes. This is more likely to be successful if there was a minor problem the first time around such as the doctor’s failure to fill in his license number. But you can also reapply if you have been able to gather stronger evidence of your disability. If the denial is based on a technical problem, you should also ask if you can correct the problem without having to reapply.
Q: How do I apply for discharge?
A: You can start the application process on-line. The Department’s contractor Nelnet will use your on-line responses to fill in some of the information on the application form and will then send you the partially completed application. You will need to complete this form and send by regular mail. You do not have to start on-line. You can also fill out the entire form on your own and send by regular mail. You must use the most recent form. It is a good idea to send by certified mail and get a receipt. The applications should be mailed to U.S. Department of Education, P.O. Box 87130, Lincoln, NE 68501-7130.
Q: How do I know the reason for the denial?
A: The Department is required to send notices that list the reasons for denials.
If you cannot resolve the problem informally, you may appeal the denial to federal court under the judicial review provision of the Administrative Procedures Act.
Q: How can I prove I’m not working during the three year “watch” period?
A: The Department will send you a form that looks like this or a similar form to get information about your earnings (or lack of earnings) during the reinstatement period. If you have earned some income from employment, you will need to provide documentation to show that those earnings are below the allowable limit. The easiest way to prove this is to provide a copy of your annual tax return. The Department also allows you to submit a number of other types of documents to prove that you do not have earnings above the limit, including:
1. Pay stubs showing year-to-date income,
2. W2, or
3. Social Security Statement. (Visit www.ssa.gov/mystatement. You must set up an account to see, download, save and print your full statement of earnings.)
If you do not have earnings from employment, you should only have to sign the Department’s “post-discharge monitoring” form. By signing the form, you are certifying that you had no earned income from employment during the reinstatement period.
Q: What happens if I get a final discharge and later want to take out a new federal loan?
A: You will have to get a doctor to certify that you are able to work. You will also have to sign a statement that the new loan cannot be discharged in the future based on any current impairment unless that impairment substantially deteriorates. The Department claims that this will also be required if your loan is reinstated.
Q: Is the amount discharged for death or disability considered taxable income?
A: The amounts discharged due to disability may be taxable income, but this is supposed to change. Under a law recently passed by Congress, loans cancelled because of disability or death after December 17, 2017, will not be taxed. We will post more information soon on the SLBA blog. For earlier discharges, the Department says: “If we approve your discharge because of VA documentation, we report the discharge of any loan debt totaling $600.00 or more to the Internal Revenue Service (IRS) for the year that the loan was discharged. If we approve your discharge because of SSA documentation or a physician’s certification, we report the discharge of any loan debt totaling $600.00 or more to the IRS for the year in which you completed the three-year monitoring period. If we report the discharge to the IRS, we will send you a 1099-C for the tax year that we sent it to the IRS. The amount of the discharged debt will be considered income for federal tax purposes and possibly for state tax purposes. You may want to consult with a tax professional to determine how this may affect your personal taxes.”
Even before the December 17 legislative change, borrowers with taxable income did not necessarily have to pay taxes. For example, borrowers might be able to claim insolvency status using I.R.S. Form 982. It is a good idea to consult a tax professional for more information.
Q: Who can I contact at the Department for more information?
A: For questions about applying for a total and permanent disability (TPD) discharge or to check on the status of an existing request, you should contact the Nelnet Total and Permanent Disability Servicer:
TDD/TTY: A borrower who is hearing-impaired may Web chat with a representative by clicking on “Chat Now” at the top of this page.
Special Assistance Team: A borrower who has special needs and requires assistance navigating the TPD discharge process simply needs to request assistance when he or she contacts the Nelnet Total and Permanent Disability Servicer.
Web site: www.disabilitydischarge.com
Office Hours: 8:00 a.m. – 8:00 p.m. (ET), seven days a week
U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501
For overnight delivery:
U.S. Department of Education
121 South 13th Street, Suite 201
Lincoln, NE 68508