As you may know if you’ve been struggling with student loan debt, it’s almost impossible to get your student loans discharged in bankruptcy. That does not mean that bankruptcy couldn’t help you get back on your feet.
Even when you have debt that can’t be discharged, getting rid of dischargeable debt like credit card debt, medical debt and the like may be able to ease your financial burdens greatly. Moreover, your student loans can be part of your payment plan in Chapter 13 bankruptcy.
If you’re totally and permanently disabled from working, however, you may qualify to have your federal student loans forgiven completely. A Total and Permanent Disability (TPD) discharge is available for people who can demonstrate they cannot work and applies to:
- William D. Ford Federal Direct Loans (Direct Loans)
- Federal family Education Loans (FEEL)
- Federal Perkins Loans
- TEACH Grant Service Obligations
A qualifying disability includes either a physical or mental condition that prevents you from engaging in any substantial gainful activity and:
- Has lasted for a continuous period of at least 60 months, or
- Can be expected to last for a continuous period of at least 60 months, or
- Can be expected to result in death
You can show you qualify for a TPD discharge by providing documentation of your total, permanent disability from the Social Security Administration, the Department of Veterans Affairs, or a physician. If you are receiving Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI) or veterans disability insurance based on a 100% disability or total disability rating, you should qualify for a TPD discharge.
Achieving a TPD discharge can be a challenge
Unfortunately, the process for achieving a TPD discharge is difficult and time-consuming. NPR recently published an investigation into the process and found that many borrowers with total, permanent disabilities haven’t been able to successfully access the program.
The problem is extremely frustrating. Earlier this year, the U.S. Department of Education told Congress that 40% of borrowers with total, permanent disabilities achieve discharge through the TPD program. However, NPR found that the number was closer to 28% of eligible borrowers had received or were on track for the discharge between March 2016 and September 2019.
Part of the problem is poor outreach by the Education Department. Another part is that the process is rather complex. For example, even after you demonstrate your total, permanent disability to the Education Department, you still need to certify your income for the next three years – even if you didn’t make any income. This is a fraud-prevention rule that has tripped up many borrowers.
If you believe you have a total, permanent disability that should qualify you for this program, don’t give up. The process takes time, but you can learn the rules and application process from the Education Department’s website.
Be aware that you will need to certify your income for three years before your loans are discharged. If you are told you have missed a step or fail to qualify, know that you have the right to appeal. Keep after it until you are sure your loans have been discharged. You may wish to hire an attorney to help you through the process.