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Discharging student loans due to disability

Migraineurs have enough to worry about without facing the financial burden of student loans. Our best laid plans to increase our income by getting an education can be ruined by migraine disability. If you find yourself unable to work because of disabling migraines, you may qualify for a Total and Permanent Disability Discharge.

How to apply

NelNet is the Total and Permanent Disability servicer for the Department of Education. They manage everything from applications to discharge and appeals. To begin the application process, you may apply online, download the application forms, or request them via email or call 888-303-7818 to request forms in the mail. If you need help completing the application forms, you may appoint a representative to work with NelNet on your behalf.

There are three ways to prove Total and Permanent Disability

  1. Service-connected disability documented by the Veteran’s Administration
  2. A favorable disability determination from the Social Security Administration showing that your next review will be 5-7 years from the date of determination
  3. Certification from doctor that your condition has lasted for at least 60 months, will result in death, or will last for at least 60 months and prevents you from substantial gainful activity (SGA)

Once your application is received

NelNet will contact your lender. You will not be required to make any payments during the determination process and all collection activity will stop. NelNet will review your application to ensure you have provided all the necessary documentation and meet eligibility for discharge. Then your application and supporting documentation will be forwarded to the Department of Education for approval. You will be notified in writing of their decision. If approved for discharge, your loans will be transferred to Nelnet for discharge. Service-connected disabilities will be discharged immediately, while all others are subject to a 3-year monitoring period.

During the monitoring period, you must notify NelNet of any of the following:

  • change of address or phone number
  • change in disability status
  • if you obtain new student loan
  • you earn income over the Federal Poverty Guidelines for a family of two:
    • $15,510 (lower 48)
    • $19,380 (Alaska)
    • $17,850  (Hawaii)

You can become ineligible for discharge during the monitoring period if your income exceeds the limits or you receive a letter from the Social Security Administration informing you that you are no longer disabled. You may also become ineligible if you obtain new student loans.  If you become ineligible during the monitoring period, payments resume with accrued interest.

If your application is denied

NelNet will contact your lender(s). Payments and collection activity will resume. You will have one year from the date of determination to provide additional information supporting your claim for discharge. After one year you must reapply.

Tax implications of discharge

Whenever any debt over $600 is discharged, it must be reported to the IRS as taxable income. If this is the case for your discharge, you will receive Form 1099-C that must be submitted with that year’s income tax return. Please consult a tax professional for the tax implications of a student loan discharge. In some limited cases, you may be eligible for insolvency which would result in the discharged amount not being taxed.  For more information, see IRS Publication 4681. Insolvency is claimed using Form 982. Your tax preparer can help with this process. Also, state income tax reporting rules vary, so make sure your tax professional is knowledgeable about your state of residency as well.

Because of the tax implications, this type of discharge is not for everyone. Each individual should carefully consider their options before applying. The results are permanent and can provide either significant debt relief or a huge tax bill. When in doubt, get professional tax advice before submitting your application.1-2

This article represents the opinions, thoughts, and experiences of the author; none of this content has been paid for by any advertiser. The team does not recommend or endorse any products or treatments discussed herein. Learn more about how we maintain editorial integrity here.

  1. Federal Student Aid. An Office for the US Department of Education. Accessed December 15, 2014. Available at:
  2. Internal Revenue Service. Accessed December 15, 2014. Available at:


  • Kerrie Smyres moderator
    5 years ago

    Great article, Tammy! Thanks for the super helpful information.

  • Guineverre
    5 years ago

    Thank you for the information! I will contact a professional too.

  • Julia
    5 years ago

    Thank you so much for this info! I’ve been trying to figure out how to do it. I have a lot of student loans, and I’m currently waiting for an SSA hearing on my disability determination. And of course, the subsequent approval. I will talk with my financial advisor about this (especially the tax implications). Will also keep this article at hand. Again, thanks so much.

  • Guineverre
    5 years ago

    Migrainous, can you explain what insolvency means? I’ve read explanations over and over but I don’t understand it. Thanks!

  • Migrainous
    5 years ago

    Here is the IRS definition:

    “A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the “insolvency” exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent.”

    It basically means you have more debts than money in the bank or assets that you own. But the calculations can get confusing and the process is complicated. Look at Form 982 which Tammy links to in the article above to get a sense of it. The difficulty of it is why you may want to consult a professional.

  • Tammy Rome author
    5 years ago

    Yes, it is complicated. Anyone considering this option really needs help from an experienced tax professional before they even start.

  • Migrainous
    5 years ago

    This is very useful information for a lot of people, but the tax implications CANNOT be overemphasized. A lot of people have gotten in financial/tax predicaments because of these discharges.

    This is not to say don’t try: I’ve actually successfully discharged my loans in the past year because of disability due to chronic migraine (and if you are not on SSA Disability, there’s very little chance it will work). It’s a huge relief, but because of the size of my loans, had a potential tax liability of about $25K before I successfully submitted Insolvency paperwork.

    So, the Insolvency paperwork was like a whole other application after the discharge. You really should consult a tax professional unless you are uncommonly good with tax forms, and very brave. You MUST be aware of and plan for the Insolvency paperwork before you even apply for a Disability Discharge. The timing of Insolvency is very important, because successfully navigating it depends on the actual date NelNet issues your discharge, and your debts and assets on the calendar day before that discharge. And you can’t really predict what your discharge date will be.

    For most people, the order of things is (drastically oversimplified):
    1. Apply for and get approved for SSA Disability;
    2. Apply for and get a NelNet Disability Discharge (while thoroughly planning Insolvency documentation);
    3. Submitting Insolvency paperwork to IRS for the year you receive a Discharge and a 1099 for the discharged loans.

    And if by any chance you are planning a Bankrupcty in there as well, it’s another variable to think about with timing for the Insolvency.

    So, having successfully done the Discharge and Insolvency, I can say it’s profoundly worth the trouble if you are chronically ill and on Disability, but you should not proceed without extensive research and help from a professional.

  • Harriette
    5 years ago

    Thank you! I wish I had known about this as I had to quit school short of graduation due to total paralysis of my legs, then surgery, seizurs (which we found out were hemiplegic migraine). This can be my saving grace.

  • Katie M. Golden moderator
    5 years ago

    Great article! I am in this process now and should know soon if I qualify!

  • Kelly (Miss Migraine)
    5 years ago

    I had no idea this was an option. I am not at a point where I can/should take advantage of this, but it’s good to know it exists. Thank you for sharing such an informative article.

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