Can a Parent PLUS Loan Be Forgiven Due to Disability?

Can a Parent PLUS Loan be forgiven due to disability? The answer is yes. If a parent borrower becomes totally and permanently disabled, they can apply for a Total and Permanent Disability Discharge. This could clear them of their responsibility to repay their federal student loans, including Parent PLUS Loans.

It’s important to note that this applies to the parent’s health, not the child’s. The responsibility lies with the parent to prove their own disability.

Learn More: What Disabilities Qualify for Student Loan Forgiveness?

To start the TPD discharge process, the parent borrower must provide a doctor’s certification or letter from the SSA or VA.

This documentation should attest to their inability to work due to an illness or injury expected to either result in death, last continuously for a minimum of 60 months, or is anticipated to last for a continuous period of no less than 60 months.

The application can be initiated by visiting the disability discharge website, managed by the student loan servicer Nelnet.

Related: Nelnet Student Loan Forgiveness

Exciting changes are in the works. As of July 1, 2023, the U.S. Department of Education is implementing new regulations that simplify and enhance the rules for targeted debt relief programs. This includes TPD Discharge. The reforms expand eligibility, remove relief barriers, and encourage automatic discharges for borrowers who are eligible due to school closure, total and permanent disability, or false loan certification.

This monumental change simplifies the process and removes the previously required three-year monitoring period, which sometimes led to borrowers losing their discharges because of paperwork lapses.

The eligibility rules for a TPD discharge are akin to the Social Security Administration’s disability benefits, albeit stricter. Only individuals classified as “Medical Improvement Not Expected” (MINE) may qualify for loan discharge.

To be eligible, a borrower’s impairment must:

1. Be medically determinable physical or mental,

2. Have been present for at least 60 months,

3. Be expected to last for at least 60 months,

4. Either result in death or be due to a 100% military-service-connected disability.

The U.S. Department of Education collaborates quarterly with the Social Security Administration (SSA) and the Department of Veterans Affairs (VA) to ascertain eligibility for disability discharge for borrowers receiving disability benefits from these organizations.

Even if a borrower isn’t receiving disability benefits from Social Security or the VA, they could still qualify for a TPD discharge if they present a certificate from a doctor. The certificate must affirm that the borrower is totally and permanently disabled, and the disability has lasted or is expected to last for five years or more or could result in death.

Related: How Do I Know If My Student Loans Were Discharged?

While embarking on a TPD discharge application may initially seem daunting, this detailed guide aims to simplify the process. To apply, documentation from one of the three sources – the U.S. Department of Veterans Affairs, the Social Security Administration, or a licensed physician – is required:

1. VA Documentation: If you’re a veteran, you can qualify for a TPD discharge by providing documentation from the VA. This documentation should confirm that you’ve received a VA disability determination due to one or more service-connected disabilities that are 100% disabling or that you’re totally disabled based on an individual unemployability rating.

2. SSA Documentation: Eligibility for Social Security Disability Insurance or Supplemental Security Income can qualify you for a TPD discharge. Alongside this, you’ll need to provide a copy of either your SSA notice of award or your Benefits Planning Query, indicating that your next scheduled disability review will be within five to seven years (or more) from the date of your last SSA disability determination.

3. Physician’s Certification: A physician can help you qualify for a TPD discharge by certifying on the TPD discharge application that you cannot engage in any substantial gainful activity due to a physical or mental impairment. This impairment must either be expected to result in death, have lasted for a continuous period of at least 60 months, or be expected to last for a continuous period of at least 60 months. Substantial gainful activity refers to work performed for pay or profit involving significant physical or mental activities.

Only a doctor of medicine (M.D.) or osteopathy/osteopathic medicine (D.O.), licensed to practice in the U.S., can complete the physician section of the TPD Discharge application, ensuring a thorough and competent medical evaluation.

Related: Student Loan Forgiveness for Social Security Recipients

You can find the TPD discharge application on the Federal Student Aid website. Here’s a brief walkthrough of the process:

• Prepare your documents: Before starting the application, gather your supporting documents from one of the above sources.

• Complete the application: Ensure you fill out every section of the form. If you’re uncertain about any part, don’t hesitate to seek help.

• Submit the application: You can submit your completed form online or via mail. Remember to keep a copy for your records.

A variety of federal loans are eligible for Total and Permanent Disability (TPD) Discharge. If you’re a borrower under one of these programs, you might be eligible to have your loan discharged:

1. William D. Ford Federal Direct Loan (Direct Loan) Program loans: Direct Loans are federal loans provided directly by the U.S. Department of Education. They cover four loan types: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

2. Federal Family Education Loan (FFEL) Program loans: Before the Direct Loan Program, the FFEL Program offered loans provided by private lenders but guaranteed by the federal government. Even though this program ended in 2010 and no new loans are being made, outstanding FFEL loans can still be discharged if the borrower becomes totally and permanently disabled.

3. Federal Perkins Loans: These loans, provided by participating schools, used to be an option for students who demonstrated exceptional financial need. Though the program ended in 2017, existing Perkins Loan borrowers who become totally and permanently disabled may still apply for discharge.

4. Parent PLUS Loans: A part of the Direct Loan Program, Parent PLUS Loans are designed for parents of dependent undergraduate students. If the parent borrower becomes totally and permanently disabled, these loans may be discharged.

Note: Private student loans from lenders like Sallie Mae, SoFi, Discover, and others are not eligible for TPD Discharge. Even if you’ve refinanced federal student loans with these private lenders, they won’t qualify for discharge due to disability. Make sure you understand the specifics of your loan before exploring discharge options.

Previously, borrowers approved for a Total and Permanent Disability Discharge, based on Social Security Administration documentation or a physician’s certification, faced a three-year post-discharge monitoring period. This measure ensured that borrowers maintained their eligibility for the TPD discharge.

Throughout this period, the borrower’s annual earnings from employment were assessed, alongside any changes in disability status or receipt of new federal student loans. You could lose your TPD discharge if your annual earnings from employment exceed the poverty guideline amount for a family of two in your state, regardless of your actual family size.

If borrowers fail to fulfill the requirements during the monitoring period, their discharged loans could be reinstated, obliging them to resume payments.

But a major change will take place this July.

In addition to pursuing broad cancellation of federal student loan debt, the Biden administration has moved to eliminate the three-year monitoring period. This change is part of wider efforts to simplify the TPD discharge process and reduce the chances of borrowers losing their discharges due to overlooked paperwork.

Scheduled to come into effect in July, this policy revision aims to make the TPD discharge process more accessible for those who qualify.

In addition to the disability discharge, there are several other routes to Parent PLUS loan forgiveness:

1. Public Service Loan Forgiveness (PSLF): For parent borrowers employed in a qualifying public service job, PSLF can be an attractive option. To be eligible, the parent borrower must make 120 qualifying payments under an income-driven repayment plan, such as the Income-Contingent Repayment (ICR) plan. Remember, the job of the parent, not the student, determines eligibility for PSLF. However, it’s crucial to keep in mind that this process takes at least ten years.

2. Income-Driven Repayment (IDR) Waiver: This waiver offers a one-time adjustment that changes whether specific payments or months are credited towards loan forgiveness. It may assist Parent PLUS loan borrowers to qualify for forgiveness under an income-driven repayment plan like the ICR plan. However, Parent PLUS loan borrowers must first consolidate their loans into a Direct Consolidation Loan to qualify for the ICR Plan, which may extend the repayment period and increase the total amount paid over time.

3. State and privately run loan repayment assistance programs: Various states and private organizations offer loan repayment assistance programs that may provide relief for parent borrowers. These programs are generally employment-based and can vary widely in their requirements and benefits. Read more about student loan forgiveness programs by state.

4. Student loan refinancing: While not a forgiveness option, refinancing Parent PLUS loans with a private lender may lower interest rates and reduce monthly payments. However, refinancing federal loans with a private lender means giving up federal benefits, including access to income-driven repayment plans and loan forgiveness programs.

Related: Parent PLUS Loan Forgiveness for Senior Citizens

Fortunately, Parent PLUS Loan forgiveness resulting from Total and Permanent Disability is not subject to federal income tax from the IRS. If a borrower receives a TPD discharge for federal student loans, including Parent PLUS Loans, the discharged amount is not deemed as income for federal tax purposes. This applies to discharges received between January 1, 2018, and December 31, 2025. This exemption was established under the Tax Cuts and Jobs Act of 2017.

But some state tax rules may differ.

The discharged loan balance might be considered taxable income at the state level. Therefore, it’s highly recommended to consult with your state tax office or a tax professional to understand potential state tax implications before filing your state tax return.

If a TPD Discharge is approved, the borrower will receive notification from Nelnet confirming that the outstanding loans or TEACH Grant service obligation have been discharged.

After the discharge approval, there are circumstances where a refund may be issued to the borrower for payments made during the application process. The timing of this refund depends on how the borrower qualified for the discharge:

1. In case of a VA Disability Determination: The loan holder will refund payments that were received on or after the effective date of the VA’s disability determination.

2. In case of SSA Documentation: The loan holder will refund payments received after the date Nelnet received the SSA documentation.

3. In case of a Physician’s Certification: The loan holder will refund payments received after the date the physician certified the borrower’s discharge application.

This process ensures that payments made during the discharge application process and after qualifying for TPD discharge are appropriately refunded to the borrower.