Bad news: Social Security disability benefits may be garnished if the beneficiary has outstanding student loans.
Good news: Some student loans can be discharged if the former student is found to be disabled.
Better news: The discharge process was recently simplified for those Social Security Disability beneficiaries who are totally permanently disabled.
Generally, total permanent disability for Social Security beneficiaries arises from conditions that are expected to end in death, or from conditions so serious that no medical improvement is expected. Social Security sets the latter group of cases for Continuing Disability Review every 5-7 years. For those with reviews scheduled more frequently, student loans may still be discharged if a medical doctor or doctor of osteopathy certifies that the disabling condition/s lasted or is expected to last for 60 months, but the new, simplified process will not be used.
Last month SSA began to identify and notify disability beneficiaries who might be eligible for the simplified discharge. The notification letter includes information about the discharge process. Social Security Disability beneficiaries need not wait for the letter, but may apply for the discharge if they believe they qualify.
The following types of loans can be discharged upon a finding of total permanent disability:
- Loans made under the William D. Ford Federal Direct Loan (Direct Loan) Program,
- Loans made under the Federal Family Education Loan (FFEL) Program,
- Loans made under the Federal Perkins Loan (Perkins Loan) Program
- A TEACH Grant, which requires you to complete a service obligation.
Veterans who have been determined to have a 100% service-connected disability may also have their student loans discharged under this program. Forms and instructions on how to apply for a student loan discharge due to disability can be found at: https://www.disabilitydischarge.com/.
At this time, the amount of the student loan that is discharged is taxable as income in the year the discharge is granted. Legislation has been proposed to stop counting discharged student loan debt as income.
Picture by: Wikipedia user “Kit”