By: Jeremy Kates0 comments

With increasing numbers of todays student population struggling to keep up with their student loan debt, those recently diagnosed with a debilitating illness or disease that may affect their ability to work face far greater challenges when it comes to repaying their student loan debt obligations.

Obviously, repaying your student debt directly correlates with your ability to work in most instances. If your disability is permanent in nature, you may be able to totally discharge your debt through a TPD (Total & Permanent Disability Discharge).

If you’re like most borrowers, you probably failed to read the fine print in the origination documents and the protections included in your loan. When it comes to federal student loans, there is a safety net mechanism for those who face a life-altering disability. There are also options for those who may face temporary issues with paying their loans from illness or disease.

Managing loans with illness or disease

After the dust settles from a life-altering event, it’s important to take a hard look at your budget. If you can’t work, you have to make adjustments to your budget that reflect these realities. You must also take a look at your debts and make some tough decisions. Without outside help, you may be forced to take more extreme measures such as bankruptcy. In some cases, you may be able to discharge your student loan debt, but there are other options that may be a better fit for your situation.

Total and Permanent Disability Discharge (TPD)

The TPD program may be a viable option for you if you are permanently disabled. If approved, all of your student loan debt is discharged. This is the recommended option if you are in this category, but unfortunately, not all loan types qualify.

List of qualifying loan types for the TPD program:

  • Federal Perkins Loan
  • TEACH Grant Service
  • FFEL – Federal Family Education Loan
  • William D. Ford Federal Direct Loan Program

If you hold debt in any of these loan programs and are permanently disabled, you are encourage to apply here.

To qualify for the program, you will have to provide documentation that proves your disability status. This would typically come from your physician, but you could also use documentation from the U.S. Veterans Department or the Social Security Administration.

If coming from the Social Security Administration, you will need to prove that you’re you are receiving Disability Insurance or SSI and that your next review is as at least five years later.

If coming from your physician the documentation must confirm that you’re unable to engage in activity due to a physical or mental handicap that is longer than 5 years and expected to continue for at least 5 more.

If you are using documentation from the Veterans Department, you will need documentation that demonstrates you are 100 percent disabled due to a service related event or a disabled employment service rating.

Effective after Jan 1, 2018, borrowers will no longer have to count the discharge as a taxable benefit which makes this option even more attractive for those who no longer have the means to pay their debt.

Student Loan Deferment

Deferment is considered a short-term solution. If you expect that in the future you may regain the ability to work or partially recover within the next few years, you may choose to defer your student loan payments instead.

When you defer your loans you make no payments. Eligibility for deferment is predicated on the following loan programs:

  • Stafford Loans
  • Direct Subsidized Loans
  • Perkins Loans
  • FFEL Consolidation Loans
  • Subsidized portion of Direct Consolidation Loans

You servicer will be able to provide you with more information on the process, but it’s typically a fairly simple process. Generally, deferment requires a financial hardship or the non-ability to work.

Student Loan Forbearance

In contrast to deferment, forbearance requires borrowers to continue making interest only payments. Like deferment, forbearance is a short-term solution for those with a disability. If you expect that you may return to work at some point, forbearance is another option for you to lessen your monthly payment burden while not allowing your principal balance to grow. Forbearance is good up to 12 months at a time.

Forbearance is available for the following loan programs:

  • Direct Unsubsidized Loans
  • Direct Plus Loans
  • FFEL Plus Loans
  • Unsubsidized Stafford Loans
  • Unsubsidized portion of Direct Consolidation Loans
  • Unsubsidized portion of FFEL Consolidation Loans

Forbearance is available for those who may experience a financial disruptive events like an illness or disability, and this event must cause a financial hardship for the borrower .

Choosing the right option

If you’re facing a severe disease or long term disability that will hamper your ability to work, the TPD program is likely the best option. However, if you’re facing a shorter term illness or disease, forbearance or deferment are good options at your disposal. Regardless of the option, each borrower facing these challenges needs to choose the option that best fits their unique situation and circumstances.

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