If you are a 100% total and permanently disabled veteran (100% T&P) rated by the Veteran’s Administration, or rated as individually unemployable (IU) by the VA for a service-connected condition, you are qualified to apply for forgiveness of any outstanding balances on your FEDERAL student loans, basically wiping the balances clean. You will also be given a refund on any student loan payments you may have made since the date of your rating determination letter. (For instance, if you are retroactively rated as 100% T&P since 2006 and you made any payments since 2006, those payments will be refunded to you)
Please note: This program does not apply to private student loans, loans you co-signed for, nor is it for family members of the disabled veteran.
Here’s what you need to know, and how to apply
The Department of Education’s disability discharge program used to require veterans to adhere to a 3-year ‘conditional discharge’ period before getting approval for this program. They also had to jump through multiple hoops to get physician documentation of their disability. This is no longer required.
In August 2008, the Higher Education Opportunity Act (HEOA) made changes to the Higher Education Act that establish a separate process for determining whether certain veterans are totally and permanently disabled. Veteran borrowers will be considered totally and permanently disabled for purposes of this discharge if the veteran provides documentation from the U.S. Department of Veterans Affairs showing that the veteran has been determined to be unemployable due to a service-connected condition.
CLICK HERE FOR THE APPLICATION in PDF format
You may also click here for the complete and detailed information about the Department of Education’s Veterans Disability Discharge Program. You may also view the Dear Colleague Letter outlining the procedures, which includes all the contact information like email, address and phone numbers to the Department of Educations Veteran’s Disability Discharge Unit.
In summary:
If you are a veteran, you will be considered totally and permanently disabled for purposes of this discharge if you provide documentation from the U.S. Department of Veterans Affairs showing that you have been determined to be unemployable due to a service-connected condition. If you provide this documentation, you are not required to have a physician complete Section 4 of this form or provide any additional documentation related to your disabling condition. You only need to complete Sections 1 and 3. In addition, certain terms and conditions for this discharge do not apply to you. See the Note to Veterans at the top of page 3.
Translation: If you send a copy of your VA letter of determination (ie, rating letter) stating you are unemployable (IU) or 100% permanently disabled, you do NOT need a physician’s signature and you do NOT need to wait 3 years for your approval. Your federal student loans, regardless of how old they are, will be FORGIVEN IN FULL.
If you are a T&P veteran who has been denied assistance for your student loans, I want to hear from you!
If you are a veteran who received a disability discharge of your student loans, but still has negative information appearing on your credit report from your student loan provider or the Department of Education, I want to hear from you!
If you are a totally disabled veteran who has been denied a VA Home Loan due to negative student loan information appearing on your credit reports, or denied a home loan due to unpaid federal student loan debt, I want to hear from you!
I worked VERY hard to get more transparency in this program. Despite the laws passed in 2008, there was no progress in 2009. By early 2009 you couldn’t find this discharge application because it was buried deep in the depths of the Department of Education website. If you called your lender to tell them about your disability, they would outright LIE to you and tell you the program didn’t exist.
That’s what they did to us. And this is what I did to fix it for EVERYONE:
I went through the GAO offices to raise hell about this, and within a month the entire DOE website was revamped with the information clearly offered on multiple pages. I submitted all the information about revamping the DOE application process via the Regulations.gov website via DOCKET ID ED-2009-OPE-0004 with my authored Document ID: ED-2009-OPE-0004-0016.
That seems to have fixed the problem.
Additionally, the 3-year conditional discharge requirement was waived and a NEW application was created to make it less confusing.
My two-year saga with the DOE will be one of the featured elements of my book about our days at Walter Reed, and how we became central figures in the Walter Reed Scandal.
I uncovered major issues with this program, all the way down to corruption from the government-contracted debt collection agencies. The story also includes a major lender, Sallie Mae, who repeatedly lied and harassed us despite confronting them for breaking the laws put in place to protect my husband. I found that Sallie Mae had acquired a majority interest in Arrow Financial Services, the very collection agency hired by the DOE to harass him about student loans he legally didn’t have to pay.
I even got an apology from the CEO of ISAC (an Illinois lender), and ~$30K refund for another disabled borrower. This was not just a problem with one lender. It was nationwide.
My book will tell you all about it.
If you are having any difficulties with this program, I want to know. I’ll raise hell again if I have to!
See also: How to Dispute Negative Student Loan Information After a Disability Discharge
See also: Success Story! Veteran student loan borrower gets loans forgiven, plus refund
If you found this post helpful or informative, you may also find more helpful topics by visiting my Veteran’s Advocacy page.
Please scroll down and leave a comment - I love to hear your thoughts!
You can also join me on Pinterest, Twitter and Facebook for sneak peeks and updates.
This post is brought to you by:
do you know if our a disabled vet and has cosigned for your dependents if the loan will be forgiven? Thanks for all your work. mark
Thank you for visiting my blog, Mark. To answer your question, no. The loan is not FOR the veteran so it will not qualify for any discharge. Co-signing on a loan only means that the co-signer (veteran) will guarantee payment of the loan if it defaults by the original borrower.
Great write up! Thanks for the effort! I have a couple of questions. First, who is it that this application must be submitted to? Is it the Dept. of Education or is it the lender? The app offered does not appear to have an address on it. Also do you know if it is true that this may only be discharged IF the total and permanent rating was awarded after the loan was originated? That seems to be gray. Thanks again.
You will submit this to your loan holder. And yes, the only way to get it approved is if you are totally and permanently disabled after the loan originated. Pay special attention to section #6 in the very first part of that section. If you have more questions, feel free to ask! They sure don’t make it easy, do they?
PS. The only gray area that I can think of is if something like this happened, and this is just a made-up scenario for demonstration purposes:
Servicemember is injured in 2006. They have an undiagnosed brain injury. As a result of taking college courses and not being able to complete them, he seeks treatment for his symptoms of a brain injury. Doctors reveal the brain injury in 2007. The VA gives a T&P rating, or even a lesser rating but with unemployability (IU) rating to bring the total rating to 100%.
In that case, the gray area would be the college course debt incurred during the interim period of the actual date of injury versus the diagnosis versus the rating by the VA. It would be the Department of Education that would decide.
I’d ask them if that is a case similar to yours. The number to call is 1-800-621-3115.
Because my husband’s loans were incurred well before his injury date, I didn’t run into this problem. However, I hope this helps guide you in your case!
Torrey, great work! I have a question that you could hopefully answer. My father is 100% service related disabled. He keeps telling me that my student loans. Some that he co-signed some that he hasn’t are eligible for forgiveness. I can not find any evidence to support that. Do you have any insight?
Hi Rob,
If the student loans were awarded to you, you’d have to be the 100% total and permanently disabled veteran in order to get the forgiveness. Loans co-signed by another 100% T&P veteran are not eligible for forgiveness. Now, if your father had student loans still outstanding, he’d be eligible.
I hope that clears things up. Thanks!
One more thing to add, Rob. You have got to make sure to pay your student loans or seek a deferment or forbearance in the case that you can’t pay them.
If you don’t pay your student loans and they go late or in default, your father is still on the hook for the balance as the co-signer of the loan.
If the lender sues your father for the balance (which is the point of having a co-signer) the only recourse in that situation is if your father has nothing but non-taxable disability income. He would then have to defend himself in court as “insolvent” and prove to the judge that his disability income is exempt from a judgment. That is the only type of ‘forgiveness’ he would get as a co-signing disabled veteran. If he has taxable income of any kind, the lender can get a garnishment for those wages.
The other thing to keep in mind if you are not paying your student loans is not just your credit/FICO score, but his as well. Any late payments will tank both your FICO scores and the late payment will remain on both your credit reports for up to 7 years, which weighs the score/credit rating down the entire time.
I hope that helps explain the “what-if’s” and possible repayment scenarios further.
Hello Torrey,
I was just recently rated 100% disabled by the VA. I have been attending college for some time prior to my rating and my question is am I eligible for tuition forgiveness even though I was not rated “unemployable?”
Sincerely,
Tricia
As long as your 100% rating includes the “total and permanent” determination, you should qualify.
I am a disabled veteran who has received a disability discharge of my student loans. The state agency has refused to remove the negative information on my credit report because they claim that they were not the last agency to service the loan and they will not retroactively remove the old information. The loans were consolidated and transferred. The consolidator (Direct Loans) of the loans list the proper information on my credit report, Sallie Mae has agreed to update my report upon hearing of my disability discharge, however the state agency will not change the negative reporting. Their claim is that ‘they are not bound by the terms of the discharge’ however they have refused to put their assertion in a written letter. Where do I begin in order to dispute the state financial aid office’ violation of the law? Thank you.
Cynda,
I am sorry this is happening to you. Have you written any letters to dispute the information on the credit report yet? Do you have proof of this in writing? If so, and since you seem to have done everything you can do to dispute the information, I ask that you email me with which state you are residing in and the name of the state agency that is involved. The reason I request this info is I would like to put you in the hands of a National Association of Consumer Advocates (www.naca.net) attorney in your state who can likely step in and get this resolved quickly, usually at no cost to you. (each attorney has their own policy on fees so I cannot promise it will be pro bono, but I can try.)
My email is torrey[at]torreyshannon.com
If you have only spoken to the state agency by phone, that won’t be enough. You must put your dispute request IN WRITING and send by CERTIFIED MAIL (with return receipt) to prove they received your dispute. I’ll give you a hint on what to say, as this is what I would say if it were me, but this is NOT LEGAL ADVICE: “Per the Fair Credit Reporting Act, as a data furnisher to credit bureaus, you are bound to uphold the laws that protect me as a consumer. I formally request and dispute the content you have furnished to any and all credit bureaus and demand immediate deletion. Per the FCRA, there is nothing that requires you to furnish any information, just that you provide accurate information. Per the attached copy of the student loan discharge determination my loans have been forgiven in full and no debt exists for these student loans. Please remove this information immediately. (then thank them in your closing and give a copy of the discharge in this letter)
Just my two cents…thanks for contacting me to share your situation! Feel free to email me or comment again if you have any further questions or problems.
Blessings,
Torrey
Great information. As a Vietnam Combat Veteran with a 100% service-connected disability I am going to apply for a student loan discharge based on the aforementioned information that you have provided to us all. I would like to take this opportunity and say “thank’s” on behalf of our nations veterans who are 100% disabled.
Respectfully,
Rodolfo Quinones
Hi Rodolpho,
Thanks for visiting and for commenting. Please let us know how this process is going for you and if I can help further. Thank YOU for your service!
Torrey
Torrey Shannon recently posted..A cruel twist of irony
First of all, on behalf of my veteran son, I thank you so much for what you are doing.
We’ve printed out the application to have his student loan discharged and have one question: at the bottom of page 1, it reads “send the completed discharge application and any attachments to:” and then it is blank. Does that mean that we are to mail the application directly to the company holding his student loan?
Thanks again for your help.
Yes, that is where it is sent to. The reason the form is blank on that section is the old application USED to be sent to the DOE. Instead of changing the form entirely when they revamped the process for veterans, they just blocked out that information. So you are correct…send it to the processor of his student loan.
Let me know how it goes! Good luck, and God bless.
Torrey
Good news! My son and I just called his student loan company to see if the app had been received, because we hadn’t heard anything since we mailed the app back in June. There was also some problem with the co-guarantor on the loan (ex-wife) who was making contact with the loan company difficult. So we weren’t sure if the app had even been received, whether they had questions and were unable to reach my son, etc.
So imagine our delight to be told that the account status was “activity suspension.” The “need to pay is suspended.” They seem aware that it is only Matt’s portion being discharged. They said we’d be notified by snail mail. As of now, they said his app had been approved–they were just waiting for the payoff payment to arrive and then they would send out paper verification.
WE realize that it may take “almost a year” for the loan company to get the payoff amount. But we are overjoyed to find out it has been approved, and he no longer needs to make the monthly payment.
A giant WOOOOOHOOOOOOOOOOOOO and a big THANKYOU to you.
This is great news! I bet the relief you feel is huge – it’s nice to know that my small part in this turned into a happy ending for you. I am so glad you updated the progress and shared this. Congrats!
Your part was “small” only like a seed of a giant tree is small. Without your help and encouragement, who knows if we would have ever gotten this far? Again, many many thanks to you.
It’s my pleasure and honor. God bless.
Torrey, so you complete and mail the application to the Institution that holds your student loan? Regards, Craig
Yes. The link above is the most current application (to my knowledge). Just send it to your lender for processing. Good luck and let us know how it goes!
And is there a link to the most current application? Thanks again…
Hi, I applied for student loan discharge back in June 2011. It’s been approved by the DOE’s NELNET in Sept 2011 and sent to Direct Loan and approved on 9 DEC 2011. According to Costumer Service it was sent for final discharge on December 9 2011, but it’s now June 1st 2012 and I haven’t received anything back. I called the number listed on the application and was told there was nothing I could do but wait. This was 3 months ago. I heard that this process took less than 6 months and sometimes even a month. What would be my next step to take, if any? I got the regional director mad 9 years ago (Spodini or something like it)could that be the problem? Thank You
My point of contact back in 2008 with the DOE was Linda Gaddy in the Atlanta office. Not sure if she is still there, but try calling her to see if she can help or knows someone who can investigate it further:
Linda Gaddy 404-562-6060
In Dec. 2010 I was awarded 100% Permanent/ Total….retro active to Aug 2005. I just found about the student loan forgiveness. I sent off the application on your site to SALLIE MAE. Seeing how the VA made my 100% P&T retro back to 2005….will I be eligible for a refund from Sallie Mae back to that date as well if and when my loan discharge is granted. If I had known about this ” discharge” info sooner I would of put in for sooner…….I have been trying to since 2005 to get my Schedular P and T disability and I finally won my case in 2010. Almost all of my ratings are combat related. I think the discharge should be retroactive just like the VA rating was retroactive. Do I have any IRS problems to look forward to? I can not get a straight forward answer on this either. Again: I am 100% Permanent and Total, Schedular. The VA said that Unemployablity was a moot subject due to my being awarded the 100% Permanent and Total rating. Regardless, I have not worked since 2008 and I don’t see it happening in the future as well….I have approx. 10 different combat related disabilities that finally pushed me to 100% level and the VA made me Permant and Total. I will check this site later but emails are best for me. I always check them and I hope to hear from you. Sincerely, Bill USMC/USN ( Two tours in Nam….first as a Marine Corps Mortarman/Grunt and the second as a Navy Corpsman. Semper Fi!
Thank you for your time and help in understanding where I stand.
Hello Bill, thanks for writing and sharing! And, thank you for your service.
The refund may be an uphill battle, though I was involved in a refund for another disabled borrower who was denied the information about loan forgiveness. To avoid a lawsuit, the lender refunded her money because she had a very solid paper trail proving the information was withheld from her and strongarm tactics were used to collect for her defaulted student loans. While I would hope they would refund any amounts paid, it may not be that simple. Please let us know how it goes and keep me updated!
Semper Fi,
Torrey
UPDATE: A refund just got easier.
You should read this letter:
“Dear Colleague Letter” from the DOE (http://ifap.ed.gov/dpcletters/GEN0907.html)
In it, it states:
For both FFEL and Perkins Loans, the loan holder refunds any payments that were made on or after the effective date of the grant of disability by the VA. A Rating Decision from the VA will generally state the effective date of the grant of disability in the section of the Rating Decision titled “Decision.” The effective date of the grant of disability is NOT the Date of the Rating Decision or the Effective Date of Payment. A letter from a VA Regional Office may simply confirm the borrower’s VA disability status, without providing an effective date. If the documentation provided by the borrower does not include an effective date, the Department will obtain the effective date from the VA, and provide that information to the guaranty agency or Perkins school.
Torrey Shannon recently posted..Why the 4th of July is “Hell Week” for many veterans
Hello Torrey,
So if this is the case, what should or do you need to do to see that payments made are refunded reflective of your disability rating date? I have just received a letter from the New York State HESC stating that my application has been received and under review.
Thanks, Craig
Actually in the letter it said it has been referred to the US Dept of Education (ED) for review… The letter was from NYHESC.
Wait for the determination from the DOE. They are the final step in this process. If your discharge is granted, then you would ask for the refund.
Hope that helps,
Torrey
Hi Torrey Storey, I’m new to this stuff and should of at least started out saying Hi in my post before this! Sometimes I have questions, but don’t know how to put them in words. I hope I make sense. Thank you for what your doing on this matter. It really helps. I learned about this student loan discharge info 1st from your site. (:
Thanks Bill.
Torrey Shannon recently posted..Why the 4th of July is “Hell Week” for many veterans
[...] my blog I shared information about veterans who qualify for student loan discharge and forgiveness if they are totally and permanently disabled, or deemed unemployable. I get a lot of traffic on [...]
Hi Torrey I have been following your Blog on this topic, and have recently applied for Loan forgiveness. My question is are there any tax or credit score implications with this process?
Hi Craig,
What do you mean by credit score implications? Did you read today’s post yet?
If I understand your question correctly, you are asking if it will hurt your credit by asking for loan forgiveness. If I am not correct, I apologize and feel free to correct me.
The answer is this: When your loan goes late or into default, it damages your credit. By the time a 100% disabled veteran finds out about this option, they are already in arrears.
The process itself will actually improve the credit; meaning, the account is no longer going late or remaining in default and can no longer be reported as a late or defaulted loan. Most times the negative information is removed upon written request after the discharge is complete. Please see today’s post: http://torreyshannon.com/2012/06/from-torreys-mailbag-how-to-dispute-negative-student-loan-information-after-a-disability-discharge/
Now, here’s a caveat…in the blog post I describe the dispute process on a discharged loan. In it I also discuss the FCRA, or Fair Credit Reporting Act. The FCRA states that ACCURATE information must appear on credit reports. The FCRA does NOT say that any information needs to be on the reports in the first place.
As long as the lender reports ACCURATE information relating to the loan prior to the discharge, they have not violated the FCRA. The discharge itself proves the veteran is no longer liable for the debt.
IN short, the only credit implications are that of late payments and non-payments prior to the discharge still appearing on your credit reports.
I have college loans FFLEP that I combined into one low interest loan in 2003 for my daughter..the loan is in my name,,in Jan 2011..the Veterans Adminstration granted me totaly permency IU disibilty with no exams to follow due to all my physical and mental service related injuries USMC in Vietnam…finding out from another vet that I could submit loan disachrge from Sallie Mae due to my perment disibilty I sent in application and my VA disibilty letter to Sallie Mae on 2-2-2012. I have called and spoke to dozens of people at Sallie Mae to give me status on my application. I got transferred and kicked around like a pinball..with no one knowing what the other is doing..finally a month ago a rep told my my app and documents were sent to a grantor on 3-13-2012 and that it would take 60-90 days to get results,,but so far nothing..I am still making my monthly payments because I do not trust these people.. ,,but I can’t get any direct answers from anyone now..are they running a scam?? How long does a loan discharge decision take?
I have emailed Sallie Mae dozens of time..no response..who governs or regulates these people anyway?..to whom are formal complaints made to against Sallie Mae…they have the worst if not the mother-of-all worst customer service in the world.
Bob,
Thank you for your service. If I read your message correctly, you are saying you applied for a discharge for loans you co-signed for your daughter to use? If that is the case (where the loans weren’t for you to use, but for her) then you will not be qualified for a discharge of those loans. The discharge does not cover loans you co-signed for. I am sorry.
If the loans were for you, and I misunderstood, I recommend calling the Department of Education’s offices in Atlanta to ask the status of the disability discharge. Here is a good contact number for you:
Linda Gaddy: 404-562-6060
Here is a “Dear Colleague Letter” from the DOE that has more contact information and details about the program:
http://ifap.ed.gov/dpcletters/GEN0907.html
I hope that helps.
Semper Fi,
Torrey
Hi Torrey,
If I read Bob’s question right he signed for the loans for his daughter to go to school probably using a Direct Plus Loan. He didn’t co-sign for her which would then render him ineligible for a discharge. My best,
Thanks Larry! You are correct. If the loan is not for the disabled veteran’s personal use for their own schooling, it cannot be discharged. I appreciate the feedback!
Hello,
Can you answer a question that I am not able to get an answer to in regards to Student Loan discharges? I am a P/T 100% Disabled Vet and have put in for a student loan discharge. Is this discharge TAXABLE? Is there a TAX liability? I am new to this whole thing. I sent your document and my VA letter in about a month ago and am waiting for action. I sent it Sallie Mae…..I had a FEL grant….?? One other thing if you please… I was granted my 100% P/T in Dec 2010 and it was retroactive to 2005. I have been paying on this loan since 2005. Will I get any funds back to 2005? Thank you for helping VETS… Bill USMC/USN/ retired
Bill, you asked two great questions.
I do not recall ever having any tax liability come of my husband’s student loans. Secondly, it’s not impossible to get a refund on past payments for student loans, though you will likely have an uphill battle. Please see my original answer to your question here:
“getting a refund is not impossible, but it will be hard”
You should also read this letter:
“Dear Colleague Letter” from the DOE
In it, it states:
However… I HIGHLY encourage you to contact the Atlanta offices at the Department of Education to pose your questions directly.
“My point of contact at the Atlanta offices and her phone number”
Please let me know the outcome.
Check out the link SallieMae provides in this news release:
http://www.salliemae.com/manage/disability.html
It is complete garbage. Doesn’t provide any information on where to submit a package. Anyone know which address to mail a TPD application to SallieMae? I’m not sure whether it goes to their billing address or the headquarters.
They do make it confusing, don’t they? That’s Sallie Mae for ya. I found this here to help you:
http://www.prnewswire.com/news-releases/sallie-mae-launches-initiative-to-educate-customers-medical-professionals-on-loan-cancellation-process-for-the-disabled-55567897.html
Who would you ask for the refund from, the loan holder?
Yes. The application is sent to your loan holder. It then goes to the Department of Education for processing and approval (or denial). From there you get a letter stating their decision.
hello!!!! is there a “clause” somewhere that a spouse/caregiver of a 100% disabled vet who now cant work because of the vet’s disability stating maybe can get this as well?!! or maybe a way to start a petition for it. We can’t pay my loans off because I take care of him full time.
I am in the same boat as you. Unfortunately, the answer is no.
One of my goals in the future is to get that changed, but it’s going to be a big battle.
Hello,
This is Bill Shipley again. I tried to call the number you gave me in regards to a post I made about getting back pay from the payments I have made to Sallie Mae. They said the number was no longer in service. You gave me : Linda Gaddy, 404 562 6060. Thank you for you time and information, bill
Thanks for letting me know about that change. Here is a “Dear Colleague Letter” from the DOE that has more contact information:
http://ifap.ed.gov/dpcletters/GEN0907.html
In it it provides the following contact info:
U.S. Department of Education
FSA, Business Operations, Processing Division
Veterans Disability Discharge Unit
61 Forsyth Street, SW 19T89
Atlanta, GA 30303
Please include a contact name, phone number and e-mail address with each submission. For submission questions, please contact the Department’s Veterans Disability Discharge Unit by phone at (404) 562-6012, by fax at (404) 562-6059, or by e-mail to FSAAtlantaContracts@ed.gov. When calling, request the Veterans Disability Discharge Unit.
Torrey Shannon recently posted..Extreme Do-Over Basics: What this experiment isn’t
Read about Kelly’s success story here:
http://torreyshannon.com/2012/11/success-story-veteran-student-loan-borrower-gets-loans-forgiven-plus-refund/
Torrey Shannon recently posted..Success story: Veteran student loan borrower gets loans forgiven, plus a refund
Nice post which The Department of Education’s disability discharge program used to require veterans to adhere to a 3-year ‘conditional discharge’ period before getting approval for this program. They also had to jump through multiple hoops to get physician documentation of their disability. This is no longer required. Thanks a lot for posting this article.
Sandra recently posted..Hayden Senior Portraits
Torrey, I cannot thank you enough for all your hard work and dedication in finding answers relating to the student loans. Your site is very informative!!
My husband recently received his 100% disability rating from the VA but he is employed. My understanding is that unemployed is not a requirement.
My question relates to a Parent Plus Loan. I’ve read and understand that it does follow under the TPD (Temp. & Perm. Disability) Discharge guidelines. The problem is that I, as the wife, have always completed the FASA forms and the parent loan forms because it only needed one parent to sign and I take care of the household paperwork. I do not work and have not worked. It’s always been assumed that the loans would be consolidated in both of our names upon graduation for prepayment. Do know if there will be a problem with consolidating the loans in both our names or if it’s even necessary before we can file for the TPD Discharge?
Also, we still have a child in school. Should we can and should we wait to file the TPD Discharge forms until the child has graduated? The loans are deferred until the graduation date.
Thank you again for all your hard work!!
~Jo
Hi Jo, thanks for your kind words!
Let’s see if I can answer everything.
To clarify, the 100% rating must have the ‘total and permanent’ designation in order to qualify. If you do not have the T&P added to the 100% rating, THEN the individual unemployability (IU) will qualify you. You do not need to be unemployed, but you DO need to be totally and permanently disabled.
Loans that your children use that are co-signed by a disabled veteran parent do not qualify for disability discharge unless the student (ie, child) becomes disabled. The discharge does not carry to anyone else but the disabled borrower.
I hope that helps clarify things. Let me know if I misunderstood your question or need clarification.
Thanks!
Torrey, I just wanted to add an additional note that my husband was awarded 100% Service Connected Permanent and Total Disability. The Children have applied for Ch. 35 DEA benefits and have received an award certificate. To be honest, we are still trying to sort through what benefits he has – it’s a bit overwhelming.
Thank you for your quick response. The loans are not in the children’s names. They are a Parent Plus loan, which according to the text I’ve read they can be discharged under the TPD Discharge program. As noted above, the problem is that they are just in my name not in both of our names as husband and wife. From what I’ve read as husband and wife we can consolidate the loans in both our names which would then put the loan in my husband’s name.
The other question was whether or not we can obtain additional Parent Plus Loans for the child still in college and then file for the TPD Discharge.
Honestly, I don’t know as I am not familiar with that program in full detail. I would refer the questions to the lender, but they may not take too kindly to that plan. I would think there are rules against it as it was meant to relieve the burden of the veteran who cannot benefit from the education they received.
This post may be helpful for the children to use in addition to the Chapter 35 benefits:
http://torreyshannon.com/2012/03/scholarships-for-wounded-veterans-and-their-families/
Thank you and your husband (and your family) for your sacrifices and service. Feel free to ask any questions you may have and I’ll do my best to help!
Thanks for trying. I think I found the answer but I do know that the Parent Plus Loan in the name of the Disabled Veteran can be discharged. I’ll need to call them to find out what options are available.
We will still need to take out Parent Plus Loans to help our child in college but I guess at this point it doesn’t really matter who’s name we put them in because I doubt the loans will be discharged now that he has been awarded the T&P disability. Hindsight is always twenty-twenty!
Here is the resource I found on consolidated loans should anyone else ask you about it:
http://www.aessuccess.org/higher_ed/pdf/TPD-Partial-Discharge.pdf
I just found out today, Jan. 21, 2013, that my request for TPD based on a letter from my VA doctor stating I was not employable, was honored by disabilitydischarge.com. When I looked at my account there was a 1099-C that I downloaded that stated Cancellation of Debt. When checking at Equifax, it shows the loan and paid and discharged. My question is do you know if this stupid 1099C means the debt is taxable??
Thanks
First the bad news:
It appears that certain student loans are taxable. See here: http://www.finaid.org/loans/forgivenesstaxability.phtml
Now, for the good news:
All is not lost. Your Best Friend is the IRS form 982. What you now need to do is establish insolvency with the IRS to have that tax liability forgiven and essentially ‘wipe out’ that 1099-C.
What is insolvency?
Insolvency is basically when your debt (what you owe) exceeds your assets (what you own). In many cases your home is exempt from being counted as an asset.
You may qualify to have part or all of the amount of the 1099-C excluded from your income if you are considered by the IRS to be insolvent. You’ll see a simplified example of how that works by reviewing this link:
Infographic: What to Do If You Get a 1099-C.
In order to claim insolvency, you will need to submit form 982 to the IRS. Review Form 982 and the instructions to see if you feel comfortable filling it out yourself. If not, your disability may qualify you for free or low-cost tax help through the Volunteer Income Tax Assistance Program.
Even if you are not completely insolvent, you would only be taxed on the amount of the forgiven debt that took you above being solvent.
As you may know by now, the IRS is not the bastion of clarity. And as you can imagine, these tax issues are tough and complex. If you get a 1099-C or have forgiven debt, please talk to a competent tax adviser for specific advice. I’m not that gal. Doing my own taxes gives me hives!
What happen if I am not 100% disable rated by the VA? But I am unemployable by the Social Security. How does that work if the VA only rates you 10%? I can have doctors statement for student loan forgiveness.
You have two options:
1. In order to waive the 3-year conditional discharge period, you would first have to be rated by the VA as 100% totally and permanently disabled OR be rated as Individually Unemployable (IU), in which case the rating determination letter would negate the need for a doctor’s certification
OR
2. You can still apply and have a doctor fill out section 4, but you would have to wait the 3-year conditional period if the application is preliminarily approved.
I hope that helps! Thank you for your service.
Torrey
my husband got all of his student loans discharged under 100% rating from the va in 2012, but now we just recived a 1099 c from sallie Mae. Has anyone geared of this happening to a 100% disabled veteran?
Please see this comment for your answer.
http://torreyshannon.com/2011/07/did-you-know-disabled-veterans-may-apply-for-student-loan-discharge-and-forgiveness/#comment-14934
[...] Well, I’ll tell you why. Just like the above-blogger said, we get insensitive comments from others who assume too much. I was even stalked by an online group who said that my husband was ‘stealing their hard-earned tax dollars”! They went absolutely bat-shit crazy when they later found out (through their continued stalking) that my husband’s student loans were forgiven due to his disability, and I was teaching others how to apply for the same benefit too. [...]
I want to make a correction to you all on the student loan discharge…100% P&T, 100% IU, and 100% schedulers are eligible for student loan discharge..100% schedulers are those vets who have a combined 100% total rating but are not IU or P&T. They usually have to go in for general exams either yearly or every couple of years to see if their condition(s) improved. If their conditions improved, there is a possibility that they can be reduced from 100% to the next lowest rating percentage depending on their case. I myself am a 100% scheduler and on my letter it states, “The Department of Education provides a program for Veterans to discharge their student loans. To be eligible, the Veteran must have a service-connected disability(ies) that is 100% disabling, be permanent and totally disabled, or be totally disabled based on an Individual Unemployability determination. For more information concerning this benefit, please contact the U.S. Department of Education, Disability Discharge Loan Servicing Center P.O. Box 5200 Greenville, TX 75403-5200 or toll free at 1-800-433-7327. Visit their website at http://ifap.ed.gov/disabilitydischarge/va/html.”
Phillip recently posted..10 Easy Tips to Take Stress Out of Your Day – staying on top of the little things!
Thank you for reiterating what I’ve shared previously. I will be creating a new FAQ page soon for those who ask the questions that have already been answered in the comments, but somehow get missed.