I Am Broke And Can No Longer Pay My Student Loan Debt
Q. I suffered severe injuries in a car accident last year. I am now financially struggling just to feed and clothe myself and my family. The doctors have put me on total disability, so I am no longer able to work.
My disability from my injuries has been classified as both total and permanent. I have about fifty-thousand in student loans, but since I can no longer work in my chosen field, I am financially struggling to pay my student loan payments, and I have very little in savings left.
Given that we now have a new Democratic President and Senate, I am hopeful that the laws have changed by allowing me to discharge my student loans?
A. You do have options. Defaulting on your student loan will not solve your problems. It will only postpone them. You indicated that you are now in the process of applying for a deferment with your lender. Applying for a deferment is a smart first step while you figure out how to proceed.
Loan Forgiveness Based on Physical Disability
As of 2022, the laws governing debt forgiveness of student loans were significantly expanded under the Biden Administration by eliminating most administrative obstacles resulting in delay and denial of disability claims.
Those eligible to apply for student loan forgiveness based on disability
- Veterans who have a service-connected physical or mental disability
- Recipients of Social Security Disability or SSI Benefits
- Persons medically certified as having a substantial medical or mental impairment believed to result in the person’s death within 60 months.
Irrespective of disability, you can still receive student loan forgiveness under the following circumstances:
- Closure of the school for which you borrowed the student loan
- The school for which you borrowed the loan falsified your eligibility to receive the loan
- The school for which you borrowed the loan failed to pay a required loan refund
- Under certain conditions in the filing of a chapter 7 bankruptcy
- The death of the borrower
Disability under federal student loan borrowers
As of 2022, you can qualify for student loan forgiveness if you suffer from a severe and permanent mental or physical disability that prevents you from engaging in gainful employment. The disabling condition must be shown to be substantial.
Student Loans Can Be Discharged In Bankruptcy
Given your severe and permanent medical disability, combined with your financial hardship, it is likely that your student loans will be discharged should you file for bankruptcy.
Under current bankruptcy law, you must prove that repaying your student loan would impose a severe hardship on you. In your case, the court will consider your physical disability and your financial condition in determining severe hardship.
For additional information on student loan forgiveness, visit the federal government website.
