What Happens to Your Student Loan if You Are Disabled?

Both federal educational loan programs--Federal Family Education Loan (FFEL) and William D. Ford Direct Loan--contain provisions for loan deferment or loan discharge (cancellation) to prevent financial hardship for borrowers with disabilities.

• Deferment. Principal payments (and for some programs, interest payments) are postponed for up to 3 years if you are determined by a physician to be temporarily totally disabled.
• Discharge. The loan is cancelled based on a physician's determination that you are totally and permanently disabled. (Defined as the inability to earn due to an injury or illness that is expected to continue.)

Loans Eligible for Deferment or Discharge

In both the FFEL and Direct Loan programs, the following loans are eligible for deferment or discharge:

• Stafford Loans
• PLUS Loans for parents and graduate/professional student PLUS loans
• Consolidation Loans

Regulations are different for FFEL loans obtained before July 1, 1993 and those obtained after July 1, 1993, so check to make sure which regulations apply to you. The following information applies to loans obtained after July 1, 1993.

Deferring Educational Loans

You are eligible for a deferment up to 3 years if repaying the loan creates an economic hardship. To be eligible, you must meet one of the following criteria:

• You are receiving federal or state public assistance (for example, food stamps, general assistance, Temporary Assistance for Needy Families [TANF], or Supplemental Security Income [SSI]).
  OR
• You are not employed full time and a significant percentage of your family income goes to student loan repayment. The percentage is calculated by a formula that compares your family size, monthly income, and your monthly loan repayment amount to current federal poverty standards. Contact your lender for specific information.

For subsidized Stafford/consolidation loans, both principal and interest are deferred. For unsubsidized Stafford/consolidation loans and PLUS loans, the principal is deferred but you must make full interest payments unless your lender agrees to reduced (or no) interest payments. You should be aware, however, that deferred interest on unsubsidized loans is added to the principal and accrues more interest.

Discharging Educational Loans

Borrowers who are totally and permanently disabled (cannot attend school or work and earn money due to a continuing illness or injury) and who have a written certification from a doctor, can have educational loans discharged (cancelled). Generally a loan cannot be discharged for a disability that you had when you applied for the loan unless the disability has worsened considerably.

Applying for Deferment or Discharge of Loans

To make an application for deferment or discharge of your loans:

1. Contact each of your lenders or the agency that is collecting on each loan, explain your circumstances, and obtain the appropriate deferment or discharge forms. You must submit separate documentation to each lender.
2. Complete the forms and attach any documentation required (for example, proof of receiving appropriate benefits or certification from your doctor).
3. Submit the individual forms and documentation to each lender.

Keep in mind that this process can be complex and receiving a deferment or discharge can take time. You are expected to continue making your loan payments until a deferment or discharge has been granted on each loan.

What if your Request is Denied?

If your lender or their servicing agency denies your request and you feel you have legitimate grounds for a deferment or discharge of your loans, you have the right to meet with them in person to discuss your circumstances. If your request is still denied, you have the right to request resolution assistance from the U.S. Department of Education, FSA Ombudsman at https://ombudsman.ed.gov.

About the Author:
Judi Sandall is a graduate of the State University of New York, with a BA in English Literature. She is a technical writer and editor who worked in student financial aid for over 20 years.