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Total Permanent Disability Discharge Student Loans (TPD)

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Hi All,

 

Just wanted to put some info up on the board in case anyone might find it useful in their building/rebuilding journey.

 

Laws for student loan disability discharges changed in 2010. If you have a permanent disability resulting in unemployment and are carrying FFEL, Perkins, Direct Loans, and/or a TEACH grant, you may be eligible for a discharge. Applicants have to show that a condition

 

- has existed for at least 60 months,

 

- or is expected to last for at least 60 months,

 

- or is terminal,

 

- or is a service-related injury as determined by Veterans Affairs

 

It is said to be more difficult than a SSDI review but in my experience it was a very easy and fast process.

 

I submitted my original paperwork in Mid-August to my loan servicer, Mohela. They kicked it back within two weeks… I had typed up a separate page of info and my doc wrote "see attached" for a couple of questions because the blanks were so darn small. Not acceptable, as far as Mohela was concerned. I resubmitted new paperwork in early September without the attachment. I received a letter from Nelnet about two weeks later confirming the application was in their hands and they would be responsible for coordinating the rest of the review. I didn't hear anything back as far as follow-up questions or requests for additional information… no phone calls, no nothin'. I was surprised at the end of October with a letter (dated two weeks prior, I guess they are a bit slow in sending out their mail) saying that the loans were fully discharged and explaining the 3 year monitoring requirements. The whole process took about two months and there was no need for any additional paperwork besides the application itself.

 

I focused on showing the condition had already existed for 5 years, instead of trying to prove the condition would persist for at least 5 years in the future. This may be why my doctor agreed to sign the form in the first place. It may also be why the approval came through so quickly but in all honesty, I really don't know if it had any impact at all. There was no feedback and no one asked any further questions. As far as I know, no one actually checked to see if there was 5 years of history for the disability. They have the option to call the doctor directly, so it is possible they may have done that without my knowledge. Either way, I don't think it hurts to focus on how long a condition has already existed in order to lend credibility to the 5-year future projection if an applicant chooses to use that option.

 

One thing to keep in mind: the review isn't really about determining a disability. It is about determining whether you can work and earn enough income to pay some or all of your student loans. The work does not have to be in your field of expertise. If your residual skills allow you to take orders for fries, work a cash register, answer phones, type on a computer, or even be a store greeter, you might have a tough time getting a TPD discharge. Itis important to present an accurate description of your work limitations in those tiny little blanks on the application, not necessarily every little sniffle and hiccup you have had since the third grade.

 

The application form is short but not without its' challenges. My doc is a smart lady and she had to scratch her head a couple of times, wondering what they were asking. The form requires near-microscopic printing. The lines are tiny (compared to all the info we might want to share). If your doc has messy writing, it is ok if a nurse fills out the form and a doctor signs it, or at least that is what my loan servicer told me when I had to resubmit mine. Veterans fill out the same form but can skip some of the questions.

 

Here is where you can get forms for the process:

 

www.disabilitydischarge.com

 

1-888-303-7818 (8am-8pm EST, 7 days a week).

 

Applicants for TPD can create an account at the website above and can check on the status of their application. I did this but never found anything terribly helpful about it. Snail mail actually updated faster than the status on the website.

 

Most servicers put loans into forbearance when the application is received. If your application is approved, you are entitled to a refund of any payments that were made after the date your doc signed your initial application.

The doc that signs the paperwork must be an MD or DO. No exceptions. Seriously, no exceptions. The doc should avoid using abbreviations,insurance codes, and things like "N/A". The form actually says N/A should be used when appropriate, but my paperwork was kicked back and the rep said one of the reasons was the use of N/A. I guess they prefer it spelled out.

 

Applications that are NOT approved for discharge are put back into their regular payment status after the review. As I understand it, there is no formal appeal process available but some people have success following up with phone calls, asking for reconsideration, and providing more information (use the 888 phone number above). If denied, it appears there is nothing to stop an applicant from applying again. I haven't seen a lot of info on this and didn't have to do any of it myself so don't quote me on that.

 

Plan to get a 1099-C for the amount of the loans discharged if approved. It is sent out based on date of the conditional discharge so expect it the January following your notification, not after the 3-year monitoring period has passed. This is considered taxable income (cancellation of debt income…CODI). Folks in certain medical, teaching, or law enforcement positions prior to becoming disabled might be able to skirt some or all of the CODI impact but for the most part, people generally get hit with an icky tax surprise when their student loans are discharged. Some folks may be able to include IRS Form 982 with their taxes to help reduce the impact of the income by claiming insolvency at the time of the discharge. Check with a tax advisor, preferably before applying for the discharge.

 

There is a 3 year monitoring period after an application is approved. Loans can be reinstated during this time. To avoid this, applicants must not have employment earnings exceeding their state's poverty guideline for a family of 2. And they must not receive new Perkins, Direct Loans, or TEACH grants. Applicants must report changes in the status of these two items to the DOE during the 3 year monitoring period.

 

Effect on my credit report: After Nelnet tookover the review, the creditor information changed on my 3 CRAs to "Department of Education Nelnet." They showed the original date of my loan consolidation with the DOE, not the date that Nelnet took over. The loans had previously reported as "Mohela Dept of Ed." The Mohela entries just completely disappeared from my reports. They did not show up as closed with account transfers. Even though my loans were officially discharged on Oct 10th, my credit reports did not reflect the status changes until just after Thanksgiving. TU reported first, EQ a couple of days later, EX about a week after TU. At that point, the loans showed as zero balances, closed, and paid as agreed. There was no effect on my FICO score when the loans were put into forbearance for the review or when the reporting changed to Nelnet. My TU and EQ FICOs showed no change after the loans were closed with zero balances. No idea what the EX FICO did.

 

It is my understanding that the discharge itself will not erase a spotted student loan repayment history from credit reports. I didn't have any bad marks on my credit reports for missed or late payments prior to the discharge, so I can't report what happens in that situation. My credit reports still show month-to-month history so I can at least vouch for the fact that the history isn't wiped out with the discharge.

 

Also, I made about ten years of payments on the loans before the TPD app. I'm not sure if those regular payments, having demonstrated a willingness to pay faithfully, helped with the approval process. I've heard through the grapevine that it does actually help but haven't found anything official on that.

 

So, there you go… everything I've learned and can share about student loan discharges for total disability. Some of it is repeat info that can be found elsewhere on the board, some of it is new. If you're still reading, pat yourself on the back for having onehelluva strong constitution.

 

Best of luck, CBers. Go forth and conquer.

 

ps... had some trouble formatting this post when it was copied to the board. Hopefully it's not too hard to read.

 

 

 

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Great info! I had all my student loans TPD"d successfully in 2012. I just started my credit repair journey and was surprised to see the huge confusing mess of student loans all over the reports!!!

 

Im still trying to process the "how to's" in the newbie section and I have been reading for days. Trying to decipher the student loan mess is weighing heavy on my. I knew my BK filed in 2004 would finally be off my back but I didn't even think about the student loans being such a problem. ON TOP of that...I successfully fought the IRS and had a Tax Lien released in 2012 as well. I thought that meant ITS GONE! NOPE its definitely on my reports. It does say "released" on the PR section but I need it removed.

 

I have sooooo much to do!

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Thank you for all this detailed information. I filed loan forgiveness paperwork for my son last month due to him coming down with schizoaffective disorder. Still waiting to see what Nelnet decides. The psychiatrist filled out the paperwork and said that the condition, which is permanent, will last for more than 60 months.  He has 2 loans, totally 11K. I always discouraged him taking out loans and I subsidized his education a lot.

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Awesome info! I’m confused though....

 

You have to show that you are unable to work but within the 3 years after the discharge you can make employment wages for the amount of a family of 2 within your states poverty level. 

 

So can you work after they are discharged? 

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After the 3 year monitoring period, my student loans have been completely discharge as of Feb. 2019.  I'm so thankful, because after being permanently disabled I didn't know what I was going to do about those student loans.  

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On 4/3/2019 at 2:06 PM, Txgirl said:

Awesome info! I’m confused though....

 

You have to show that you are unable to work but within the 3 years after the discharge you can make employment wages for the amount of a family of 2 within your states poverty level. 

 

So can you work after they are discharged? 

I am currently applying for TPD on my federal student loans and thought as long as you are on SSDI and meet their criteria that you would qualify for the TPD?  I am currently working 12 hours a week and making $500 a month at a part time job but I am still considered disabled.  Is there a possibility they will reject me bc I am working p/t even though still considered disabled for SSDI purposes?  Thanks

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