I'm 57 and disabled. Can I get my federal student loans discharged?

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The Credible Money Coach provides information on disability discharge for federal student loans. (Credible)

Dear Credible Money Coach,

I have a federal student loan for $169,000, and I’m 57. I have a disability, but I’m still working. Can I have my loan forgiven when I am no longer able to work? — Kimberley

Hi Kimberley, and thanks for your email. Your question reminds me that it’s easy to assume student loan debt is exclusively a Millennial problem. That’s far from the truth.

In 2021, 6.4 million Americans between 50 and 61 years of age owed a total of $281.8 billion in federal student loan debt, according to U.S. Department of Education statistics. Among 2 million people aged 62 and older, the total was nearly $98 billion. And those numbers don’t take into account private student loan debt that older Americans may owe.

If student loan debt is a burden when a person is in their active earning years, carrying that debt into retirement — or when you can no longer work due to disability — can be a financial crisis. It makes sense to look at all your options for dealing with student loan debt, from income-driven repayment plans and refinancing into a lower interest rate, to having your debt forgiven due to disability.

Ways to get rid of student loan debt

I believe most people try their best to repay their student loans. And the federal government offers programs and repayment options intended to help make student loan debt more manageable.

Income-driven repayment plans can reduce monthly payments on federal student loans to an amount that fits into your budget. Some private lenders also offer flexible repayment options. Unfortunately, repayment plans can extend how long it’ll take to repay the loans.

You can also consolidate federal student loans into a Direct Consolidation Loan, refinance private student loans into a single new loan, or refinance federal and private student loans together. All those options have benefits and drawbacks to consider.

We’ve heard a lot in the media over the past year about student loan forgiveness. Public Service Loan Forgiveness and other federal forgiveness programs apply to people working in certain jobs of public service, such as the military, civilian police force, government work, healthcare roles, nonprofit organizations, and teachers working in low-income communities. Borrowers need to meet certain criteria and requirements to qualify to have all or some of their federal student loans canceled under these programs.

Federal student loans may also be discharged if a borrower develops a disability.

Discharging student debt due to disability

Kimberley, since you’re still working it sounds like your disability is only partial at this time. But since you anticipate a day when you’ll no longer be able to work due to that disability, you may qualify in the future to have your federal student loan debt discharged.

The U.S. Department of Education says that certain federal student loans can be discharged if the borrower experiences a "total and permanent disability." This discharge can apply to Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans, as well as to TEACH Grant service obligations.

Getting a disability discharge is an involved and potentially lengthy process. Here’s a rough outline of the process:

You’ll contact the Department of Education’s TPD discharge servicer, Nelnet, by phone or email and request a TPD discharge application. Any required federal student loan payments will halt for 120 days to give you time to submit your application and documentation.
Complete and submit the TPD discharge application along with documentation that demonstrates you qualify. This documentation can come from the U.S. Department of Veterans Affairs (if you serve in the military), the Social Security Administration, or a physician.
If your documentation is from a physician (an M.D. or D.O.), your doctor will need to certify on the TPD application that you have a physical or mental disability that prevents you from "engaging in any substantial gainful activity." The disability must have lasted for at least 60 continuous months, be expected to last for at least 60 continuous months, or is expected to be fatal.
Nelnet will review your application and documentation. While your application is under review, you won’t be required to make any payments on your federal student loans.
If your application is approved, Nelnet will notify you that your loans have been discharged. If you made payments after getting a VA disability determination, or after Nelnet received SSA or physician documentation of your disability, those payments may be returned to you.

Keeping your discharge status is easier because of the pandemic

Prior to the pandemic, borrowers who weren’t veterans or service members would be subject to a three-year monitoring period. During that time, they were required to submit annual documentation of their employment income, and their loans could be reinstated for several reasons, including if their income exceeded limits or the SSA determined they were no longer disabled.

But because of the pandemic, the Education Department suspended the requirement for annual income certification beginning on March 29, 2021. And the department returned to discharge status any loans that it had reinstated on or after March 13, 2020, due to failure to certify annual earnings. It’s unlikely that this waiver will become permanent, but for now it’s easier to retain your discharge status.

Right now, most federal student loan payments are suspended through May 1, 2022, which could give you more time to get your TPD paperwork in order before submitting your discharge application. You can learn more about disability discharge at Studentaid.gov.

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About the author: Dan Roccato is a clinical professor of finance at University of San Diego School of Business, Credible Money Coach personal finance expert, a published author, and entrepreneur. He held leadership roles with Merrill Lynch and Morgan Stanley. He’s a noted expert in personal finance, global securities services and corporate stock options. You can find him on LinkedIn.