Question: “I have over $ 80,000 in loan debt for my bachelor’s and master’s degrees. Now I am disabled and unable to use my diplomas. My current loans are on hold, but I currently have no income due to unemployment. Any advice would be greatly appreciated.
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Responnse: Student loans ideally help carry out work which, in turn, is added to income to pay off the advance. Disability due to illness or accident that makes it impossible to work turns the equation upside down. Here’s what the pros – you and those in a similar situation to you – might consider to help ease the burden of student debt, from canceling the loan to changing your repayment structure.
Tax gurus agree that in your case there are two main variables at play: what is your type of loan (federal or private) and how serious is your disability (permanent or temporary). “Not being able to use your degrees and never being able to work again are two different issues,” says Leslie Tayne, finance and debt resolution lawyer, founder and CEO of Tayne Law Group. Either way, take action. With the resumption of student loan repayments in May 2022, a certain urgency is brewing. “You can’t wait for the government to act,” she said, “and hope that you’re going to be part of a group where they are paying off the loans. “
If you are unable to work long term, you may be eligible for a student loan forgiveness through total and permanent disability (TPD) release. This program saves you from having to repay a Federal Direct Loan, Federal Family Education Loan Program (FFEL) loan, and / or Federal Perkins loan or fulfill a TEACH Grant service obligation. According to financial aid expert Mark Kantrowitz, author of several books, including “How to appeal for more university financial aid”, the TPD discharge presents some complexity, including the methods of application and eligibility. . Eligibility requires proof that you are totally and permanently disabled, and this can come from the Department of Veterans Affairs (VA), Social Security Administration (SSA), or a medical certificate. The eligibility requirements include that the disability has lasted for five years or will last for five years or will eventually result in death.
But beware: approving the landfill isn’t the end of the story. “There is the possibility of a three-year post-discharge follow-up period during which earned income must be less than 100% of the poverty line for a family of two,” says Kantrowitz.
Some good news: The Biden administration “made it easier for older disabled borrowers,” says Andrew Pentis, loan expert and certified student loan advisor at StudentLoanHero. In August, more than 323,000 student borrowers with total and permanent disabilities had their debt canceled, representing relief of $ 5.8 million. The change applied to borrowers identified through the SSA data match.
If you don’t qualify for PDT, consider signing up for an income-based repayment plan that allows you to set your monthly federal student loan payment at an amount you can afford based on of your earned income. This would keep your monthly payments at $ 0 as long as you have no income. “It would give you a kind of temporary respite to make sure your loans stay up to date,” says Pentis. “You avoid delinquency and all the negative effects that result from it. StudentAid.gov offers in-depth reviews of loan cancellation and release programs.
But what if you are a private student loan borrower? Go to the source of your loan – bank, credit union, private lender – to learn about disability debt forgiveness. “It’s really a lender-by-lender case,” says Pentis. “Each lender has their own application process and their own policy. In all cases, you will need to show proof of your disability.
Resorting to a plan B, as in the case of bankruptcy, can be a long-term avenue to explore. “The bankruptcy court looks at certain factors in determining whether the repayment of student loans is causing undue hardship, thereby justifying the cancellation of part or all of the student loan,” says Tayne. The circumstances are difficult to prove. “The odds are long and slim,” says Tayne, “but it may be a possible option. “