The U.S. Department of Education formally reopened a critical student loan forgiveness program for borrowers with medical impairments last week, paving the way for people to apply after a temporary hiatus.
The Total and Permanent Disability discharge program can wipe out the federal student loan debt for borrowers who are unable to work (or can work only minimally) due to a medical condition. Nelnet, an external loan servicer contracted with the Department of Education, had operated the TPD discharge program for years. But as part of a long-planned transition, the program has now been moved to a new portal at StudentAid.gov, the Department of Education’s centralized website. The department had paused the application process during the platform transition. But as of last week, the new TPD portal is up and running.
How Student Loan Forgiveness Works For The TPD Discharge Program
The TPD discharge program allows borrowers to apply for student loan forgiveness on the basis of a disabling medical impairment. Direct federal student loans, FFEL-program loans, and federal Perkins loans are eligible. To qualify, borrowers must be able to demonstrate that they are unable to engage in “substantial, gainful activity” due to a physical or psychological impairment that has lasted for the last five years, is expected to continue for the next five years, or is terminal.
There are three ways student loan borrowers can demonstrate that they qualify for a TPD discharge. Borrowers who are certified by the Veterans Administration as being 100% disabled due to a military service-connected impairment can automatically qualify, as can certain recipients of Social Security disability benefits (such as those who have been receiving such benefits for five years or more, or are on a medical review cycle of five years or more).
“We work with VA and the SSA to identify those who qualify for a discharge based on their status with VA or the SSA,” says the Department of Education. “If we receive information from the appropriate agency indicating that you qualify for a TPD discharge, we’ll send you a letter notifying you of your eligibility for discharge.”
Other borrowers can submit a medical provider’s certification form with their TPD discharge application, where a designated medical provider would certify that the borrower meets the TPD discharge standard. The provider must also provide details on the medical diagnoses and associated impairments. A doctor, physician’s assistant, nurse practitioner, or licensed independent psychologist can complete the form.
If the Department of Education approves the TPD discharge request, the borrower’s federal student loan balance would be discharged. Borrowers may then be subject to a three-year post-discharge monitoring period, during which the discharged loans can be reinstated under certain circumstances, such as if the borrower returns to school and takes out a new federal student loan, or is determined by the Social Security Administration to no longer be disabled. The department no longer monitors a borrower’s income during the three-year period, following rule changes made by the Biden administration. Borrowers who are approved for a TPD discharge under the Veterans Administration prong are not subject to any post-discharge monitoring.
New Student Loan Forgiveness Application Portal For TPD Discharge Program Is Live
The Department of Education had put the entire TPD discharge application and processing system on hiatus starting in January due to the planned platform transition from Nelnet to StudentAid.gov. This is similar to what happened with the Public Service Loan Forgiveness program last year. PSLF can provide student loan forgiveness for borrowers who work in nonprofit or government jobs for 10 years or longer. The PSLF program had been handled by MOHELA, another external loan servicer, but was transitioned to StudentAid.gov last summer after an extended processing pause.
As of late March, that TPD discharge transition appears to have been completed. Borrowers can now apply for student loan forgiveness through the program at StudentAid.gov.
“If you haven’t received an automatic discharge letter, you can submit a TPD discharge application digitally or manually (using a paper form),” says the department’s updated TPD discharge website.
To apply online, borrowers should “Log in to StudentAid.gov with your account username and password and navigate to the TPD Application page,” says department guidance. “On the disability info page, select the option that best describes your situation. Upload supporting documentation of your eligibility for discharge (there will be prompts). Sign and certify your TPD Discharge Application.” The new online application system allows both the borrower and the medical provider (if applicable) to digitally sign via the portal, similar to the relatively new PSLF employment certification system.
Alternatively, borrowers can apply manually using a paper or PDF version of the application. “On the disability info page, select the option that best describes your situation; upload supporting documentation of your eligibility for discharge” via the TPD discharge portal,” suggests the department. “Choose the manual signature option (after completing the online application, you will receive a link to download a PDF version to sign and submit). Print your application. Sign your application. If you selected certification from a medical professional have them sign your printed application.” Only hand-drawn signatures are accepted for manually signed application forms, although scanned signatures are accepted.
Borrowers can then upload the completed TPD discharge application materials or submit them via fax or regular mail. “This method will take longer” to process than the online application tool, however, warns the department.
Some advocates are concerned that the backlog of TPD discharge applications associated with the three-month processing pause, as well as recent major staff cuts at the Department of Education by the Trump administration, may lead to lengthy delays and longer processing times. Since applications just reopened, it’s too soon to know whether such delays are happening. But borrowers should be aware of the possibility, as the PSLF program experienced similar delays and backlogs after its transition last summer.
“Even after the processing pause is over, borrowers should expect delays in getting updates about their TPD application status,” said the National Consumer Law Center in a blog post earlier this year. “The Department of Education and its contractors will likely have a backlog of applications that will take time to process.”
Other Things Borrowers Applying For Student Loan Forgiveness Through TPD Discharge Should Consider
Borrowers applying for student loan forgiveness through the TPD discharge program can try to pause their monthly payments while they work on completing the application materials.
“To get relief while you apply for TPD discharge, you can get your student loan payments paused for 120 days,” says the department. “You just need to let your servicer know you’re planning to apply for TPD discharge.”
Borrowers can also have a designated representative help them with the TPD application process. This can be a trusted family member or friend, a social worker, or an attorney.
“You can designate an individual or organization to complete and submit your TPD discharge application on your behalf and to assist you throughout the discharge process,” says department guidance. “For example, you might designate a family member, or you might designate an organization such as a veterans’ service organization.” The borrower and representative would need to complete and submit a TPD designated representative form, which would allow the Department of Education to work with the representative on the borrower’s behalf.
It’s also important to note that the TPD discharge could be a taxable event for some borrowers.
“The amount of your loan that’s discharged due to TPD discharge may be considered income for state tax purposes,” says the department. “Consult with your state tax office or a tax professional before you file your state tax return. Whether your discharged loan amount may be considered income for federal tax purposes depends on when you received the discharge.” Borrowers who are approved for a TPD discharge via the Social Security or medical provider’s certification prongs are considered to have had their student loans forgiven for tax purposes after the three-year monitoring period ends.
Federal taxation on TPD discharges and other types of federal student loan forgiveness was halted under laws passed by Congress in 2017 and 2021. However, that tax relief is set to end at the end of this year. It is unclear whether the current Congress will extend some, or any, of that relief.
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