Student loans are often taken out when a person is fully able to work or is employed at the time. The loans may have been utilized for a child’s education or to further his/her own education. The loans may become a problem for a newly disabled person to pay due to no fault of his/her own. It may become necessary for the person to reduce the number of hours worked each week due to doctor’s visits or physical therapy. Often times, the person is unable to continue to be an active member of the workforce and is placed on a small disability income.
- It is possible for a disabled person to apply for a disability discharge to cancel all student loan debt. The on-line address for the Total and Permanent Disability Discharge is www.disabilitydischarge.com/home. The William D. Ford Federal Direct Loans, Federal Family Education Loans and Federal Perkins Loans are all eligible for consideration. Teacher Education Assistance for College and Higher Education Grant Program service obligations are also eligible for possible cancelation of obligations. If a discharge is granted, the person is no longer required to make loan payments or serve the TEACH obligations.
- Veterans may file an application with proper documentation from the U.S. Department of Veterans Affairs if the disability was service connected. Persons receiving SSI or SSDI benefits may file an application along with notice of award from the Social Security Administration. Others will need certification from a physician that the impairment may result in death or is expected to continue at least 60 months or has already lasted for 60 months.
- In January, generally several months after celebrating the cancellation of student loans, many disabled persons are receiving a 1099-C form from the government. The IRS is treating the cancellation as taxable income. According to the amount of debt that was cancelled, this may mean a tax bill of $10,000 to $50,000 or more. The average working class family would struggle to pay a tax bill of this size, but for a person on a fixed income this is unfathomable.
- The stress from the unexpected consequence of loan forgiveness may result in additional medical issues for the disabled person. Disability advocates along with tax specialists are appalled at the IRS for burdening disabled persons with a debt he/she cannot possibly pay. While the tax debt may be much less than the loan debt, the IRS wants to be paid immediately. While, the loan payments may be spread out over time. One debt has just been traded for another debt.