Disability and Death
Disability Discharge Self-Help Packet
There is a discharge program for borrowers who become very seriously disabled after attending school. This total and permanent disability discharge is hard to get, but it is something that you should definitely consider if you have a very severe disability. Although this probably isn’t much consolation, your student loans will also be discharged if you die. Unfortunately for borrowers, private student loans do not have these protections. You can ask your private lender for relief, but these lenders are not required by law to help you.
DISABILITY
Total and Permanent Disability
This discharge requires certification from a doctor that you are unable to work and earn money because of an illness or injury that is expected to continue indefinitely or result in death. This is a very restrictive standard and more than what most disabled individuals must prove to qualify for Social Security or other government disability benefits. Congress recently passed a law that makes some changes to this standard. Most of the new rules will go into effect on July 1, 2010. One important change is already in effect. Veterans who have been determined by the Secretary of Veterans Affairs to be unemployable due a service-connected condition qualify for this discharge without having to provide additional documentation from a doctor. The Department has released a letter with more information for veterans applying for this discharge.
FFEL, Direct and Perkins loans are eligible for this discharge. Parents with PLUS loans may apply for discharge based on their own disabilities, not those of their children. If two parents have a PLUS loan and only one becomes disabled, the other parent remains obligated to repay the loan.
As of July 1, 2008, doctors are no longer required to certify the date that your disability began. Instead, the doctor only has to certify that you are totally and permanently disabled as of the date of application for discharge. The Department issued a new application form in February 2009. Borrowers should use the new form when applying for discharges. However, the Department will continue to process applications submitted on the old form.
It’s important to ask the doctor to provide as much information as possible about your disability. A lot of applications got lost in the process because doctors are unable to respond to repeated requests for more information. The new form requires doctors to provide more detail about your disability. The more information you can submit at the outset about your disability, the better. Tell your doctor to be prepared to get follow-up letters and requests from the loan holder and Department of Education. In some cases, your doctor will be given a very short period of time to respond to these requests.
You must send the application to the loan holder. It is a good idea to send by certified mail and get a receipt. If you have a Direct Loan, you should send the form to the Department of Education at this address:
U.S. Department of Education
Conditional Disability Discharge
P.O. Box 5200
Greenville, TX 75403-5200
If you have a Perkins loan, you should submit your application to your school or whichever entity is collecting on behalf of the school. The school will then send your application to the Department. This self-help packet will help you apply for a disability discharge.
If you have a FFEL loan, the holder, such as a guaranty agency, will make a preliminary determination. If you make it through this preliminary round, the application will be sent to the Department of Education for further review. You should get a letter from your loan holder explaining this process. (see sample)
If the Department agrees with the preliminary decision, you will be placed in a three year conditional discharge period. The three year period begins on the date the doctor signed the completed application form. You will get a final discharge at the end of this period as long as you do not take out any new federal student loans during the three years and as long as you do not have earnings from work that are more than 100% of the poverty line for a family of two. This means that you are allowed to try to work, but if you earn more than this amount, the Department assumes you are not really permanently disabled. Even though you can work in this limited way after being placed in the conditional discharge period, you cannot be working at the time the doctor signs the form.
If you received a disbursement of a federal loan after the date the doctor signed the form, you can still qualify for the discharge as long as you return the funds to the loan holder within 120 days of the disbursement date.
The Department of Education says that the approval process can take up to a year. Although this is a long time, collection efforts should stop once you submit a completed application until a decision is made. Interest should not accrue during this time.
A final discharge means that the loan is canceled and all payments, whether voluntary or involuntary, received after the doctor signed the form should be returned. You may appeal denials to federal court. You will get a notice of final discharge.
Note: If you are a veteran with documentation from the U.S. Department of Veterans Affairs that you are unemployable due to a service-connected condition, you can receive a final discharge as soon as the Department reviews your application. The three year conditional period does not apply in these cases. See this letter for more information.
Disability Discharge Tips and FAQs
Q: Which rules will the Department use to evaluate my application if I applied before July 1?
A: The Department will use the old rules in evaluating your discharge. Under the old rules, the doctor was required to certify the date that your disability began. You will not be eligible if you took out federal loans after this onset date. There is an important difference between a medical “condition” and a “disability.” If you had a condition at the time you took out the loan, you should still be able to qualify, assuming that the condition later deteriorated into a total and permanent disability and as long as you did not take out any new loans after this date.
Q: If I submitted the old form after July 1, 2008, was my doctor required to provide the onset dates for my disability?
A: No. The Department also announced that it will accept applications received after July 1, 2008 even if the onset dates are not provided.
Q: Is it possible to work and still be eligible for a disability discharge?
A: Even though the government may say otherwise, the answer should be yes. You are allowed to earn less than 100% of the poverty line for a family of two during the conditional period. This allows you to explore whether you can get back in the workforce. However, you will not be eligible if you were working at the time the doctor signs the application form. This is because the definition of disability is that the borrower cannot work and earn money because of an injury or illness that is expected to last indefinitely or result in death.
Q: Is evidence of a Social Security or Veterans Affairs disability decision sufficient to qualify for a student loan discharge?
A: For Social Security, no. For V.A., yes, if you have been determined to be unemployable due to a service-connected condition.
Q: Can I apply again if I was denied the first time?
A: Yes. This is more likely to be successful if there was a minor problem the first time around such as the doctor’s failure to fill in his license number. But you can also reapply if you have been able to gather stronger evidence of your disability
Q: How do I know the reason for the denial?
A: The best way is if the notice explains the reasons. Unfortunately, most borrowers receive a notice with a very general reason for denial such as “medical review failure.” You should not assume that “medical review failure” means that your application was denied on the medical merits. Loan holders and the Department use this denial category for just about everything. You should contact the loan holder or Department of Education Disability Unit and ask for the specific reasons for the denial
If you cannot resolve the problem informally, the denial may be appealed under the judicial review provision of the Administrative Procedures Act.
Q: What happens if I get a final discharge and later want to take out a new federal loan?
A: You will have to get a doctor to certify that you are able to work. You will also have to sign a statement that the new loan cannot be discharged in the future based on any current impairment unless that impairment substantially deteriorates.
Q: Who can I contact at the Department for more information?
A: The Department has set up a Disability Discharge Loan Servicing Center. The Center can be contacted by phone at 1-888-869-4169, by e-mail at disability_discharge@acs-inc.com, or by regular mail at U.S. Department of Education, Disability Loan Servicing Center, P.O. Box 5200, Greenville, TX 75403-5200. Hearing-impaired individuals with access to a TDD can call 1-888-636-6401. You may also need to contact the Department’s servicer, Affiliated Computer Services (ACS) at 888-869-4169.
The Department also has a web site with more information about disability discharges.
DEATH
Your government loans will not survive your death. This means that your estate will not have to pay back your student loans. Also, the death of both parents with a PLUS loan (assuming both took out the loan) is grounds for the “death discharge.” The death of only one of the two obligated parents does not cancel a PLUS loan. A parent can also discharge a PLUS loan if the student for whom the parent received the loan dies.
Discharge because of the borrower’s death (or, in the case of PLUS Loans, the death of the student for whom the parent borrowed) is based on an original or certified copy of the death certificate submitted to the school (for a Federal Perkins Loan) or to the holder of the loan (for a FFEL or Direct Stafford Loan).
WARNING FOR PRIVATE LOAN BORROWERS: There is no administrative discharge for private student loans when the borrower dies. Private loan debts will be handled the same way as other debts. That means that they will be part of the borrower’s estate. This estate settlement process (also called probate) varies by state.
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