Total and Permanent Disability (TPD) Discharge 2026: Rules & Tax Warning

If a physical or mental disability prevents you from working, you should not be burdened by student loan debt. The Total and Permanent Disability (TPD) Discharge program completely cancels your federal student loans. While the application process has become much easier in 2026 thanks to automatic data matching, a significant “tax bomb” risk has returned this year. This guide explains the new rules and how to protect yourself. For other options, see our Student Loan Forgiveness 2026 Ultimate Guide.

The 3 Ways to Qualify

You can prove your disability in one of three ways:

1. Veterans Affairs (VA): If you are a veteran with a service-connected disability rating of 100% (or are “individually unemployable”), you qualify automatically.
2. Social Security (SSA): If you receive SSDI or SSI benefits and your review schedule is classified as “Medical Improvement Not Expected” (MINE), you qualify.
3. Physician Certification: If you do not meet the VA or SSA automatic criteria, your doctor (MD or DO) can sign a form certifying that your disability prevents “substantial gainful activity” and has lasted (or will last) for at least 60 months.

The “Tax Bomb” Warning (2026 Update)

This is the most critical update for this year.

• 2018–2025: During this period, TPD discharges were completely tax-free under federal law.
• 2026 Status: As of January 1, 2026, the specific tax exemption has expired. Unless Congress renews it, the IRS may treat your discharged debt as taxable income.
• What this means: If $50,000 is forgiven, the IRS might view it as you earning $50,000 in income, potentially resulting in a tax bill. Always consult a tax professional before filing.

The 3-Year Monitoring Period

Good news: This rule is much more relaxed now.

• Income: The government no longer monitors your income after discharge. You can attempt to work without immediately losing your discharge.
• New Loans: The only major restriction is that you cannot take out new federal student loans for 3 years. If you do, your old debt will be reinstated.

How to Apply

Most people don’t even need to apply anymore.

1. Automatic Discharge: The Department of Education now matches data with the SSA and VA. If they find a match, they will send you a letter saying your loans are being discharged automatically.
2. Manual Application: If you haven’t received a letter, you can apply manually.
   • Download: Get the TPD Discharge Application Form (OMB No. 1845-0065).
   • Certify: Have your physician fill out Section 4.
   • Submit: Send it to Nelnet (the TPD servicer).

Frequently Asked Questions

• “Does this cover Parent PLUS loans?” Yes! If the parent borrower becomes disabled, the Parent PLUS loan can be discharged.
• “Can I get a refund?” Yes. If your effective disability date was in the past, you may receive a refund for payments made after that date.
• “Will this hurt my credit?” No. The trade line is removed or reported as “Paid in Full/Discharged,” which often helps your credit score by lowering your debt-to-income ratio.