Consumer Law Pro

Discharge Student Loans Outside of Bankruptcy

There are many Student loan workout programs to choose from. For disabled student loan borrowers, there is a program that can discharge their student loans entirely known as the Total and Permanent Disability Program (TPD). See www.disabilitydischarge.com.

There are a few ways to receive a discharge under the TPD program which is run by Nelnet on behalf of the Department of Education. This article discusses discharges for borrowers who receive social security disability income (SSDI) or Supplemental Security Income (SSI).  

“If Nelnet has received information from the Social Security Administration (SSA) indicating that someone is receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits and that the person’s next scheduled disability review will not be for 5 to 7 years from the date of their most recent SSA disability determination, Nelnet will contact the person and explain how the person may apply for a TPD discharge, but the person may or may not need to submit documentation of their SSA disability determination.”

Nelnet is supposed to contact borrowers who may qualify; however, I have worked with many borrowers who meet the guidelines but did not receive notification. This is often because the DOE has an outdated address. If you receive SSDI or SSI, and it will be at least 5 years before your next SSA disability determination per your SSA form 2459 report, I recommend you submit a TPD Application with a SSA BPQY report to be considered for a TPD Discharge. 

You must provide documentation of the SSA notice of award for SSDI or SSI benefits and/or a Benefits Planning Query (BPQY form 2459) stating that your next scheduled disability review will not be until 5 to 7 years from the date of your last SSA review.

Nelnet will notify you and the student loan servicer whether your discharge application was approved.  Your student loan servicer will tentatively discharge your loans from their records.

If you are granted a TPD Discharge based on SSA disability’s 5-7-year medical monitoring criteria, your discharge is subject income monitoring for three years. Nelnet will send you a form to complete each year on the discharge anniversary date.   You must prove that you did not earn more than that year’s US Poverty Guideline for a family of 2, regardless of your family’s actual size. For the year 2019, the income level must be below $16,910. Some types of earnings are not counted in the income determination including SSDI, SSI, child support, spouse’s earnings, and retirement benefits.  

After the three-year income monitoring period, the discharge becomes permanent. However, there can be issues if the person later wants to apply for more federal student loans.

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