Some Slight Consolation

[Pat94]

As a college financial aid officer I know a little about federal student loans and checked with my college's loan officer to confirm.

Student federal loans do not have a co-signer and are cancelled at either death or total/permanent disability of the student. I understand in some community property states, a spouse might be responsible, that it depends on specific wording in those states; I have never worked in such a state so I really don't know anything about community property.

PLUS loans are federal ones for the parents of dependent, undergraduate children. Currently, there is no co-signer requirement for one. They can be cancelled by death or total, permanent disability of the parent or death of the child. I am not certain of the permanent, total disability allowances for the child.

If you have a student currently enrolled in college you should not request the disability discharge until your child graduates if you need one for subsequent years for that child or younger children. Once you are approved for the discharge you can not get another one without reinstating what was discharged.

Private loans are a whole different story. They definitely don't have the protections the federal ones offer. Be sure you carefully read the fine print before signing.

Some federal and state student loans are "repayable" by working in designated areas. If the student does what was promised then a certain part of the loan is cancelled.

Any cancellation or discharge of a loan, private, state, or federal is considered to be taxable income by the IRS and is charged a tax liability. If you can't pay the taxes owed the governments go after everything they can get including tax refunds (which you wouldn't have if you owed), social security retirement benefits or social security disability benefits. The IRS is not a forgiving agency! However, many people have worked with attorney's to get the IRS to consider a reduction in the amount owed. That is usually done when there are mega taxes owed but may not be done for normal(?) people like you and me.

If you have questions I can answer concerning college financial aid, you are welcome to contact me. Good luck with financing college at the same time those medical bills keep rolling in. Personally, I have given up on the idea of ever being able to retire if I want to continue paying my medical bills. On the other hand, I am so fortunate my employer worked with me and supported me through the bad times and that I have been able to return to work.