Many people applying for Social Security disability have financial obligations that are put on hold during the determination process. One of these affecting more and more applicants are student loan payments. If you are approved for Social Security disability, you may be eligible to have these loans discharged. The U.S. Department of Education has a fairly simple process for determining disability, and once you meet their standards, your federal student loans may be discharged. Private loans are typically not eligible for this process, and you would need to contact your individual loan company to find if you are eligible for any other disability discharge.
After Social Security finds you disabled, make a copy of the determination letter laying out your benefits as well as when your next disability review date is, typically scheduled for five to seven years after the approval. Submit this letter to the Department of Education, along with the other forms required, available on their web site, www.disabilitydischarge.com. They may temporarily suspend your loan payments while deciding whether you qualify for loan discharge.
Once the discharge is approved, there are other requirements that must be met, such as your income must remain below a certain level, you may not apply for any other federal student loans, or you must continue to be disabled under Social Security’s rules. If these are not met, the loans may be reinstated. Keep in mind you may be responsible for any tax burden related to the discharge of the loans. Typically, the discharged loan amount is reported to the IRS, and may be considered income to you, the tax payer.
If your disability case is pending with Social Security, then you may be able to apply for a loan discharge before they find you disabled. If you have a supportive doctor that is willing to complete the necessary certification paperwork, showing that your condition may either result in death, has lasted for a continuous period more than 60 months, or can be expected to last more than 60 months, this may be sufficient for the Department of Education to discharge your loans. The same post-approval requirements would apply.
If you are receiving Disability Income or Supplemental Security Income from Social Security, and your federal loans are approved for discharge, this will not affect the benefits you receive.