Sep 04, · How Death And Disability Discharge Works. Federal student loans have a provision where, in cases of death or permanent disability, your student loans are discharged. Dec 04, · In the past, the department hesitated to discharge student loans automatically for tax reasons. "Before , a person receiving disability discharge could have been hit with a . Total and Permanent Disability (TPD) Discharge. Welcome to the online information resource center for TPD discharge of William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, Federal Perkins Loan (Perkins Loan) Program loans, and Teacher Education Assistance for College and Higher Education (TEACH) Grant Program service .
Related videosShould I Take Disability Student Loan Discharge?
This is for your information only and does not require any action on your part. As a result of a change in tax law, loan balances that are discharged due to TPD are not considered income for federal tax purposes if you receive the discharge during the period from January 1, through December 31, If you qualify for a TPD discharge based on documentation from the VA, the date you are considered to have received the discharge for tax purposes is the date that we approve the discharge.
If you qualify for a TPD discharge based on documentation from the Social Security Administration or a physician's certification, the date you are considered to have received the discharge for tax purposes is the completion date of your three-year post-discharge monitoring period. If you receive a Form C, you should keep the form for your records, but you do not need to include it when filing your federal tax return.
For additional information, visit irs. The discharged loan amount may be considered income for state tax purposes. You may want to consult with your state tax office or a tax professional before you file your state tax return.
Depending on your situation, you will either attach the supporting documentation to your application or have your physician complete Section 4 of your application. Not all federal student loans are eligible for TPD discharge. You will only be considered for disability discharge if your loan is:. If your federal loan does not fall into one of these categories, it will not be available for TPD discharge. There are three categories of proof demonstrating that you have a total and permanent disability qualifying you for TPD discharge:.
If the Department of Education approves your application, your loan will be discharged and you will not be required to make further payments or further service under your TEACH obligation. Beyond this, any payments you have made on or after your date of disability will be returned to you.
If your loan is discharged on the basis of VA documentation of your service-related permanent disability, then nothing further is required. Your loan will be discharged and no further payments will be required. You receive a notice from the SSA stating that you are no longer considered totally and permanently disabled OR that your disability review period is no longer five to seven years from your most recent Notice of Award.
During this three-year monitoring period, you are also required to inform the Department of Education if:.
Once your application for TPD discharge is received, you will not be required to make loan payments until a decision on your application is rendered. First, any federal student loan amount that is discharged may be considered taxable income, depending on when you received the discharge and how you qualified. That means you might have to pay federal taxes on the amount discharged. Also, you may need to pay state income tax on the discharged amount, even if you don't have to pay federal income tax.
Consider consulting a tax professional to better understand your tax obligation if you receive a student loan discharge based on disability. Finally, student loan borrowers who have been granted a TPD discharge normally will be placed in a three-year monitoring period. During that time, your lender or the Department of Education may check in with you to be sure you still meet the criteria for the discharge.
However, discharges granted based on VA certification are not subject to this monitoring period. There are several scenarios where the obligation to repay your discharged student loans could be reinstated, such as if you receive a new TEACH Grant or a new federal direct student loan, or if you receive annual job pay over the poverty guideline amount for a family of two in your state.
Visit StudentAid. Meghan Lustig 1 hr ago. Load Error. Microsoft may earn an Affiliate Commission if you purchase something through recommended links in this article. Found the story interesting?
Like us on Facebook to see similar stories.