Ask Ben: Help! Repaying My Student Loans is Tough!

In Ben Spec, Benefits and Employment Articles, Featured, News by Ben Spec

Last month I was enjoying the beautiful fall colors in Wisconsin when suddenly. . . the air turned icy! Now I’m at the beautiful Grand Canyon where the temperatures are in the high 50s and wildlife abounds. Just this morning I saw a Golden Eagle, Canyon Wren, and several Bighorn Sheep. There are 447 known species of birds in the Grand Canyon!

I’ll take a break from enjoying the wildlife to answer a question about student loans from Tom back in Wisconsin.

Dear Ben,

I took out some student loans for college before my disability began. I currently am able to work only part time even though I completed my degree. So, I am having a hard time making my loan payments. Is there any way that I can get some relief from this financial bind?


Dear Tom,

This is a hard situation for many people with student loans and a disability. First, it’s important to know if your loans are from a private lender or federal loan servicer. If you borrowed money from a private lender, contact them directly to find out how they can help you. If you have federal loans, there are several ways to get help with your payments. I hope my answer helps you get some relief!

Repayment Plans

Deferment or Forbearance

Loans that qualify for deferment or forbearance include Direct Loans, Family Education Loans, and Perkins loans.

You can ask for deferment or forbearance if you think your difficulty repaying your loans is temporary. These both give you a period of time (usually not more than 3 years) when you don’t have to make your payments. The main difference between them is that with a deferment you may not have to pay the interest that builds up during the deferment period, and with forbearance you would.

Some reasons you could be allowed to defer your loan repayment include:

  • being enrolled in an approved rehabilitation program such as DVR (Division of Vocational Rehabilitation).
  • being unemployed or unable to find full-time employment.
  • receiving SSI (Supplemental Security Income), or Supplemental Nutrition Assistance (previously called Food Stamps).
  • working at least 30 hours/week and having financial hardship.

Apply to your loan servicer for a deferment or forbearance.  Learn more about these options at the U.S. Department of Education’s Federal Student Aid website.

Income-driven Repayment Plans

Another option is to apply for an “income-driven repayment plan”. These plans set your monthly loan payment at a level that is affordable, based on your family income. If your income is low enough your monthly payment could be as low as $0 per month. And, if your loan is not fully paid off within 20-25 years under such a plan, the remainder of the loan is forgiven.

You can apply to your loan servicer for an income-driven repayment plan. Find out more about these plans at the U.S. Department of Education’s Federal Student Aid website.

Total and Permanent Disability Discharge

Loans that qualify for TPD (Total and Permanent Disability Discharge) include Direct Loans, Family Education Loans, and Perkins loans.

You can apply for a TPD discharge if you think that your disability is going to prevent you from making payments for a long time, if ever.  You will not have to repay your student loans at all if you are found to have such a disability. You might qualify for a discharge if:

  • you have a 100% service-connected disability according to the VA (U.S. Department of Veterans Affairs).
  • you have a Social Security disability that will be reviewed only every 5 or 7 years.
  • a doctor certifies that you are totally and permanently disabled, and have not or will not be able to perform “substantial gainful activity” for at least 5 years.
  • a doctor certifies that your condition can be expected to result in death.

A TPD discharge based on Social Security or a doctor’s determination is followed by a 3-year period of monitoring. You will have to repay your loan if you earn more than the Federal Poverty Level for a family of two (regardless of your family size) during this period. A discharge based on a VA determination doesn’t have the 3-year monitoring period.

Learn more about TPD discharge and the application process at the U.S. Department of Education’s Federal Student Aid website.

There are many important details about these programs that are not mentioned here. It’s important to work with your loan servicer to get more complete information and help with the process.

Taxes On Discharged Loans

If your loan is discharged after January 2018, you will not have to pay Federal taxes on the discharged amount. Loans with a discharge date before January 2018 are still subject to taxes on the amount discharged. However, State taxes on discharged student loans vary by State. In Wisconsin, if your loan is discharged after January 2018, you will not have to pay State (or Federal) taxes on the discharged amount.

The final date of discharge includes the 3-year monitoring period if there was one. So, for example, if your loan was approved for discharge in July 2016 with a 3-year monitoring period, July 2019 will be your final loan discharge date.

If you’re not in Wisconsin, be sure to check on the tax laws in your state.

Good luck with this, Tom. And I hope that eventually you will be able to increase your work and earnings as well!


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