Schizophrenia and Student Loans. How Can My Daughter Discharge Her Loans? – Beverly

“Dear Steve,

I have a 30 year old daughter that has Schizophrenia and she has school loans that she pays back out of her SSI check every month. She works PT and has a car but still lives with her elderly parents. Is there anything that can be done to “forgive” school loans?

Schizophrenia is a terrible life long disease as it is but she should be given the opportunity to experience living on her own but can not afford it because she has her school loans to pay back.
Is there anything she can do?


Dear Beverly,

If these are government backed student loans then they may be eligible for discharge. Be warned however, it is a long and time consuming process. Oh yes, frustrating as well. Just prepare for the angst in advance and the journey will be easier.

Here is what the Department of Education has to say about the process.

If a borrower is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months, the borrower may apply for a total and permanent disability (TPD) discharge of his or her Federal Family Education Loans (FFEL), Perkins Loans, William D. Ford Federal Direct Loans (Direct Loans), or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation. This page describes how to apply for a disability discharge and what the process is like.

NOTE: Certain veterans may be considered totally and permanently disabled based on a different standard, and may apply for discharge through a separate process. Please see Veterans Disability Disharge for more information.

To qualify for this discharge, a physician must certify that the borrower is totally and permanently disabled according to the definition above. The borrower must submit the application to the loan holder within 90 days of the date the physician certifies the application. No payments are due on the loan while the borrower’s eligibility for discharge is being reviewed. If a borrower receives a FFEL, Perkins, or Direct Loan program loan or a TEACH Grant prior to the date the physician signed the application (the Physician Signature Date) and a disbursement of that loan or grant is made on or after the Physician Signature Date and before the date the U.S. Department of Education (the Department) grants discharge, the loan holder must suspend processing of the borrower’s loan discharge request until the borrower ensures that the full amount of the disbursement has been returned to the loan holder or to the Department, as applicable.

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The borrower’s loan holder will review the completed discharge application and any accompanying documentation to determine whether the borrower appears to be totally and permanently disabled in accordance with the definition above. If applicable, the loan holder may also contact the borrower’s physician for additional information. For FFEL Program loans held by a lender, this determination will be made by both the lender and the guaranty agency. If the loan holder determines that the borrower does not appear to be totally and permanently disabled, the borrower will be notified of that decision. The borrower must then resume payment of his or her loan(s). If the loan holder determines that the borrower appears to be totally and permanently disabled, the borrower’s loan(s) will be assigned to the Department. The Department will be the new loan holder.

If the Department determines that the discharge application supports the conclusion that the borrower is totally and permanently disabled, the Department grants a discharge. The borrower is then subject to a 3-year post-discharge monitoring period beginning on the date the Department grants discharge. During this monitoring period, the borrower (1) must not have annual employment earnings that exceed the Poverty Guidelines for a family of two in the borrower’s state; (2) must not receive a new Perkins, or Direct Loan or a new TEACH Grant; and (3) must ensure the return of a loan disbursement to the loan holder or TEACH Grant disbursement to the Department within 120 days of the disbursement date, in the case of a loan or TEACH Grant that was made before the discharge date, but was disbursed during the 3-year post-discharge monitoring period.

During the 3-year post-discharge monitoring period, the borrower must promptly notify the Department if the borrower receives annual earnings from employment that exceed the poverty line amount for a family of two in his or her state, regardless of actual family size; or if there is a change in the borrower’s address or telephone number. If requested, the borrower must also provide the Department with documentation of his or her annual earnings from employment.

If at any time during or at the end of this monitoring period the borrower does not meet the conditions outlined above, then the borrower’s loan(s) or TEACH Grant service obligation(s) will be reinstated and the borrower will be required to make payments or fulfill his or her TEACH Grant service obligation.

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If a borrower’s obligation to repay a discharged loan is reinstated, the Department will notify the borrower of the reinstatement, and will not require the borrower to pay interest on the loan for the period from the date of discharge until the reinstatement date. The notification to the borrower will include (1) the reason(s) for the reinstatement; (2) an explanation that the first payment due date on the reinstated loan will be no earlier than 60 days after the date of the notification of reinstatement; and (3) information on how the borrower may contact the Department if the borrower has questions about the reinstatement or believes that the obligation to repay the loan was reinstated based on incorrect information. Comparable information will be provided to TEACH Grant recipients if a discharged TEACH Grant service obligation is reinstated.

Here is the link to the TPD student loan discharge process.

The definition of “Substantial gainful activity” is a level of work performed for pay or profit that involves doing significant physical or mental activities, or both. That definition might encompass your daughter’s condition.

Here is the Discharge Application: Total and Permanent Disability.

Please post your responses and follow-up messages to me on this in the comments section below.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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