Help is Here for People With Severe Disabilities Struggling With Student Loans

By on February 12, 2018

Tens of thousands of disabled veterans and hundreds of thousands of people living with severe disabilities are now eligible for new student loan protections starting this year. 

What’s new for borrowers with severe disabilities and student debt?

Due to a recent change in federal law, borrowers whose student loans are forgiven on or after Jan. 1, 2018, due to “death or total and permanent disability” no longer have to pay federal income taxes on those forgiven loans.

Now, when the Department of Education or a private lender forgives a student loan due to a borrower’s death or disability, the amount of forgiven debt no longer counts as income and does not cause a borrower’s federal taxes to go up. Prior to this change some borrowers with disabilities faced financial distress driven by a tax bill because they qualified for debt relief. A Catch-22.

What are my rights if I’m severely disabled and have student debt? 

Since the beginning of the federal student loan program, borrowers who are considered  have been eligible to have their federal student loans forgiven. 

This includes:

Additionally, some private student lenders also offer disability discharge options for borrowers with disabilities. Lenders that offer these programs may use guidelines that differ from the Department of Education to determine eligibility, so borrowers should their private student loan servicer to find out more information. 

Hundreds of thousands of student loan borrowers with severe disabilities could benefit

In 2016, the Department of Education worked with the Social Security Administration to proactively who were eligible for the TPD discharges of their federal student loans. They found 387,000 borrowers with disabilities, who collectively owed over $7.7 billion in federal student loans. Roughly half of those borrowers were in default on their student loans.

The Department of Education sent these borrowers letters alerting them to their eligibility for discharge while also warning them about the potential tax consequences. Now, the borrowers with disabilities that are stilled burdened by student debt can receive loan forgiveness without incurring any tax penalties.

READ  Court Holds Terrason Spinks and Jet Processing Inc. Liable for $280 Million in Consumer Harm Caused by the IWorks Scheme

Additionally, there are likely to be tens of thousands of severely disabled veterans who don’t yet know that they qualify for federal student loan forgiveness. According to the VA, more than 800,000 severely disabled veterans are unemployable due to a service-connected disability. 

While we don’t know how many of these veterans have student loans, even just a small percentage could mean there are tens of thousands of disabled veterans with billions of dollars in forgivable federal student loans hanging over their heads. The Departments of Education and Veterans Affairs recently put into place some of the who qualify for federal student loan forgiveness.

Are you a servicemember or a veteran with questions about credit cards, auto loans, or debt collection? We also provide help for servicemembers, veterans, and military families at every stage of their military career and beyond. See our .

Seth Frotman is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young consumers, visit .

Patrick Campbell is the CFPB’s Deputy Assistant Director for the Office for Servicemembers Affairs. To learn more about our work for servicemembers, visit . 

This article by was distributed by the .


Last step, fill out the information below or call us for Priority Assistance.

What problems are you having with your report?

Your first name is required. Your first name is required to be at least 2 characters. Your first name cannot be longer than 50 characters.
Your last name is required. Your last name is required to be at least 2 characters. Your last name cannot be longer than 50 characters.
Your email is required.
Your phone is required. Your 10 digit phone number is required.
Your state is required.
Your age is required. Your age must be greater than 18. Your age must be less than 100.

By clicking on the "Contact Me" button above, you consent, acknowledge, and agree to the following: Our Terms of Use and Privacy Policy and to receive electronic communications. We take your privacy seriously. That you are providing express "written" consent for Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS - charges may apply), even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list. Consent is not required as a condition to utilize Debt.com services and you are under no obligation to purchase anything.

By clicking on the “Contact me” button above, you consent, acknowledge, and agree to the following: (1)That you are providing express “written” consent for Lexington Law Firm, Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS – charges may apply), or dialed manually, at my residential or cellular number, even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list; and (2)Lexington Law’s and and Debt.com’s Terms of Use and Privacy Policy. Consent is not required as a condition to utilize Lexington Law or Debt.com services and you are under no obligation to purchase anything.

About Research Department

Here is where you will find important stories located from around the web which can impact you and your financial life.
%d bloggers like this: