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Total and Permanent Disability Discharge: True Student Loan Forgiveness


In 2015 the Student Aid Bill of Rights included plans to make paying for higher education easier for more Americans. As part of that plan the Department of Education teamed up with the Social Security Administration to identify Social Security beneficiaries who would be eligible for a student loan forgiveness program referred to as the ‘Total and Permanent Disability’ (TPD) discharge. The agencies found that around 387,000 individuals were ‘positively identified’ as meeting the criteria for TPD but hadn’t applied. They were all informed by SSA of a streamlined process for applying for the discharge. The agencies have not stopped there as Social Security continues to notify beneficiaries who may be eligible for the TPD discharge.

It is not only Social Security disability recipients who are eligible: veterans who can show they have a 100% service-connected disability, and any individuals who can show through documentation from their doctors that they have a permanent disability that prevents them from working at substantial gainful activity levels can also apply.

That might seem to be quite forgiving but, in fact, the TPD did come with a catch as the loan amount that was forgiven was considered to be ‘income’ for tax purposes. This placed student borrowers in another kind of debt as many would have owed the IRS taxes which they may have struggled to pay back.

Fortunately, a recent change in federal law has determined that as of the beginning of this year those discharged TPD loans are no longer considered to be ‘income’ and so student borrowers won’t have to pay federal income taxes on those forgiven loans. This should doubtless prove a great financial and mental relief to many.

For more information on the TPD and how to apply please go to: https://www.disabilitydischarge.com/