Disability Discharge of Federal Student Loans

The borrower’s permanent and total disability is grounds for a student loan discharge. Borrowers with FFELs, Direct Loans, and Perkins loans are eligible for this discharge.[1] This includes consolidation loans.

The definition of disability changed as of July 1, 2010. The new definition is less restrictive and is more favorable for borrowers because it allows discharges to be granted to borrowers who are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, can be expected to last for a continuous period of 60 months, or has lasted for a continuous period of 60 months.[2]

The borrower applies directly to the loan holder for a disability discharge. If the borrower has different loan holders, the borrower should submit a separate application to each loan holder.

In order to help ensure a more efficient application process, borrowers should follow these guidelines from the Department:

  1. Be sure to sign the application. A photocopy must contain an original signature.
  2. Separate applications must be submitted to each loan holder. Copies may be submitted. However, each copy must have an original borrower signature. Original physician signatures are not required on each copy.
  3. The application must be signed by a doctor of medicine or osteopathy who is licenses to practice in the United States.
  4. The doctor must complete the application.
  5. Doctors should not use medical abbreviations or insurance codes on the application.
  6. The doctor must provide more than a diagnosis. The doctor must also identify the medical condition and clearly and fully explain how the condition prevents the borrower from working and earning money.

The lender may continue collection activity until it receives the certification of disability.  The borrower may request an administrative forbearance to stop collection activity during the review period.

It is important for borrowers to realize that the Department of Education has a very high rate of denials due to “medical review failures.” However, the denial is not tied to an actual medical review. Instead, this is a generic denial category that can mean anything from a missing license number to the physician forgetting to check a box on the application form. The Department of Education often sends a follow-up letter to physicians that require a relatively prompt response and failure of the physician to timely respond may lead to a medical review failure. Borrower should not assume that a denial based on a medical review failure is tied to an actual medical review.

The Department of Education has set up a Disability Discharge Loan Servicing Center. The center can be contacted by phone at 1-888-869-4169, by email at disability_discharge@acs-inc.com, or by regular mail at U.S. Department of Education Disability Discharge Loan Servicing Center, P.O. Box 5200, Greenville, TX 75403-5200. Hearing impaired individuals with access to TDD can call 1-888-636-6401.

If borrower obtains a discharge, the balance of the loan is discharged.[3]

Dunne Law Offices, P.C.
1500 John F. Kennedy Boulevard, Suite 200
Philadelphia, PA 19102
(215) 854-6342 (Office)

[1] 20 U.S.C. § 1087(a); 34 C.F.R.  §§ 674.61 (Perkins Loan), 682.402(c) (FFEL), 685.213 (Direct Loan).

[2] 34 C.F.R. § 682.200

[3] 34 C.F.R. § 682.402(c)(3)(ii).