Neighborhood Legal Services, Inc.

Discharging Student Loans Due to Disability
© 2000 by Neighborhood Legal Services, Inc.
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I have a disability. Can my student loan be forgiven?

It depends. The Department of Education has very high standards for what is considered a disability. Even if you qualify for SSI or SSD, you are not automatically eligible to have your loans discharged.

What is the Department of Education's standard?

In order for your loan to be forgiven, you must be totally disabled, and the injury or illness must be expected to continue indefinitely or result in death. Even if your condition prevents you from working in your chosen field, you are not considered permanently and totally disabled so long as you can attend school, earn money, or get another job somewhere.

If you were disabled when you took out the loans, your condition must have deteriorated substantially, rendering you permanently and totally disabled.

What if they do find me totally and permanently disabled?

If they decide to forgive your loans, there is some good news for you. Not only do they cancel the unpaid balance and interest of Defense, Direct, and Perkins Loans, but the cancellation applies retroactively, as well. The lender has to return any payments that you made after the date you became certifiably permanently and totally disabled.

How does discharge of consolidated loans work?

You can have a consolidated loan discharged if you can show that you became permanently and totally disabled after you took out the underlying loans. It will not be held against you if you consolidated them after your injury or illness occurred.

Is there anything I can do if my disability is not total or permanent?

The Department of Education should help you obtain a loan deferment or forbearance so that you can at least temporarily stall the payments.

I think I qualify for a discharge, forbearance, or deferment. How do I apply?

You could contact your lender. You can also contact EFUND and request forms called a "Total and Permanent Disability Cancellation Request" or a "Temporary Total Disability Deferment Request." You and your doctor will have to fill them out.

You can contact EFUND at:

EFUND
P.O. Box 419045
Rancho Cordova, CA 95471-9045
(916) 526-7282

Once I have a loan discharged, can I get new loans?

Yes, you may be able to get a new loan after you have had a loan discharged because of a disability if: your doctor states you can engage in substantial gainful activity; and

you put in writing that the new loan cannot be canceled based on any condition present when the new loan is made.

Are there any other circumstances under which my loans can be forgiven?

Yes. For a brief overview, see the attached chart. Feel free to contact our office at 847-0650 with any questions.

STUDENT LOAN DISCHARGE OR CANCELLATION

Cancellation Condition Direct

Loans

 FFEL

Program

Loans

 Perkins
Borrower's total and permanent disability or death 100% (1) 100% (1) 100% (1)
Full-time teacher in a designated elementary or secondary school serving students from low-income families No No (3) Up to 100% (2)
Full-time special education teacher (includes teaching children with disabilities in a public or other nonprofit elementary or secondary school) No No Up to 100% (7)
Full-time qualified professional provider of early intervention services for the disabled No No Up to 100% (4.7)
Full-time teacher of math, science, foreign languages, bilingual education, or in other fields designated as teacher shortage areas No (3) No (3) Up to 100% (4.7)
Full-time employee of a public or nonprofit child - or family-service agency providing services to high-risk children and their families from low-income communities No No Up to 100% (4.7)
Full-time nurse or medical technician No No (3) Up to 100% (4.7)
For loans made on or after November 29, 1990, service as full-time law enforcement or corrections officer No No Up to 100% (4.7)
Full-time service as a staff member in the educational component of a Head Start program No No Up to 100% (2)
Service as a VISTA or Peace Corps volunteer No (3) No (3) Up to 70% (3)
Service in the Armed Forces No No Up to 50% in areas of hostilities or imminent danger (2)
Bankruptcy In some cases (5) In some cases (5) In some cases (5)
Closed school (before student could complete program of study) or false loan certification.8 100% (6) 100% (6) No
  1. Includes death, but not disability, of the student for whom the parents borrowed. This additional provision applies to any such student who dies on or after July 23, 1992.
  2. Service qualified for deferment also.
  3. No funding available for this benefit at this time. Does not apply to PLUS Loans.
  4. This benefit applies to Perkins Loans made on or after July 23, 1992.
  5. Seven years must have passed between the date of the loan and the date the borrower files for bankruptcy (not counting deferment or forbearance periods). If seven years have not passed, cancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship.
  6. For loans received on or after January 1, 1986.
  7. Service qualified for deferment also for loans made on or after July 1, 1993.

NOTE: You must formally request a deferment through the procedures established by the holder of your loan, and you must continue making payments until you are notified the deferment has been granted.

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