If you get a total and permanent disability (TPD) discharge, you don't have to repay your federal student loan(s) or complete your TEACH Grant service obligation. As of May 2023, around 492,000 borrowers have gotten loan forgiveness through TPD discharge. And there are multiple ways to qualify!
You Might Have Garnishment Protection
Federal law shields Social Security Disability Income (SSDI) and Supplemental Security Income (SSI) from most creditors. This means debt collectors can't touch these funds in your bank account, with a few exceptions like federal taxes or child support.
After at least 20 years of student loan payments under an income-driven repayment plan — IDR forgiveness and 20-year student loan forgiveness. After 25 years if you borrowed loans for graduate school — 25-year federal loan forgiveness.
When you enter a valid loan agreement, the value of what you receive is not considered income and won't reduce your Supplemental Security Income (SSI) benefit. However, any money you borrow but don't spend in a given month will count towards your SSI resource limit in the following month.
If you've defaulted on your federal student loans, the government can garnish your Social Security benefits. They can take up to 15% of your monthly payment without giving you a court hearing or additional warnings. This hits older Americans the hardest.
There are small ways to bring in some more money on top of SSDI. Doing odd jobs for family or friends, selling items on eBay, and babysitting are just a few options. Some extra income can help you pay for additional living costs.
The 7-year Rule And Student Loans
According to Experian, once you start making payments, any late payments that are 7 years old will be erased from your credit report, but the rest of the account history will stay.
By law, Social Security can take retirement and disability benefits to repay student loans in default. Social Security can take up to 15% of a person"s benefits. However, the benefits cannot be reduced below $750 a month or $9,000 a year. Supplemental Security Income (SSI) cannot be offset to repay these debts.
If you are delinquent on your student loan payment for 90 days or more, your loan servicer will report the delinquency to the national credit bureaus, which can negatively impact your credit rating. If you continue to be delinquent, you risk your loan going into default.
The so-called “five-year rule” for Social Security disability allows people who have already received disability benefits to skip a required waiting period in the re-application process after they've returned to work.
Yes, a credit card company can sue you if you're on disability or receiving other federal benefits. Even though you can be sued for credit card debt, you may find that you are judgment-proof. If SSDI or other protected benefits are your only source of income, you may be considered judgment-proof.
In general, most debt will fall off your credit report after seven years, but some types of debt can stay for up to 10 years or even indefinitely. Certain types of debt or derogatory marks, such as tax liens and paid medical debt collections, will not typically show up on your credit report.
If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you've made 120 qualifying payments—i.e., at least 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.
If you have an intellectual disability, you may receive funding from the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, and Federal Work-Study programs.
If you're totally and permanently disabled, you may qualify for a discharge of your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation.
Income driven repayment plans allow borrowers to make student loan payments based on their discretionary income. After 20 years — sometimes 25 — the remaining balance is forgiven. While forgiveness is distant, these plans allow many retirees and seniors living on a fixed income to have an affordable payment.
If you default on a federal student loan, then your wages or bank accounts can be garnished without a court order or judgment. The maximum that can be withheld for federal student loan garnishment is 15% of your disposable income.
In certain situations, you can have your federal student loans forgiven, canceled, or discharged. That means you won't have to pay back some or all of your loan(s). The terms “forgiveness,” “cancellation,” and “discharge” mean essentially the same thing.
You qualify for the Fresh Start program if you have eligible federal student loans and you were in default when the student loan payment pause went into effect.
Generally, the maximum Federal SSI benefit amount changes yearly. SSI benefits increased in 2024 because there was an increase in the Consumer Price Index from the third quarter of 2022 to the third quarter of 2023. Effective January 1, 2024 the Federal benefit rate is $943 for an individual and $1,415 for a couple.
Social Security Disability Insurance (SSDI) – The maximum payment is $3,822 a month (up from $3,627 in 2023). The maximum family benefit for SSDI is about 85% to 150% of the disabled worker's benefit. The maximum payment at full retirement age is $3,822 monthly.