Overview

When a borrower becomes permanently disabled or dies, some loans include cancellation, discharge, or deferment protections that prevent the debt from falling solely on the borrower’s family. Federal student loans have clear, administrated paths for Total and Permanent Disability (TPD) discharge and death discharge; private loans and mortgages vary by lender and contract. (Federal Student Aid; Consumer Financial Protection Bureau)

How these options typically work

  • Federal student loans: The Department of Education offers a Total and Permanent Disability (TPD) discharge and automatic death discharge for federal loans. Applicants can apply with documentation from the Social Security Administration (SSA), Department of Veterans Affairs (VA), or a physician. Approved discharges remove the balance and stop collection activity. (Federal Student Aid — studentaid.gov)

  • Private student loans and personal loans: Policies differ by lender. Some lenders offer disability discharge or cosigner protections; others do not. Review the promissory note and contact the servicer to confirm. See our guide on the tax implications of private loan forgiveness for more detail. (See internal: Tax Treatment of Forgiven Private Student Loans)

  • Mortgages and secured loans: Mortgage debt does not automatically vanish at death. Lenders often look to the borrower’s estate or surviving co-borrower; some mortgages may have servicer policies or private mortgage protection products that help. Check the mortgage contract and life-insurance or mortgage-protection policies.

Documents and evidence you will need

  • Death certificate (for death discharge).
  • Medical records or official disability documentation: SSA determination of disability, VA disability rating, or a physician’s statement confirming total and permanent disability.
  • Loan account information and recent statements.
  • Any form the servicer/loan holder requires (TPD discharge forms for federal loans are available from your servicer or on studentaid.gov).

Step-by-step: Applying for a federal TPD or death discharge

  1. Gather supporting documents: SSA/VA proof, physician documentation, or death certificate.
  2. Contact your loan servicer or visit studentaid.gov to start a TPD or death discharge application. (Federal Student Aid)
  3. Submit forms and documentation as instructed; keep copies and track delivery.
  4. Await review — servicers typically respond with acceptance, denial, or request for more information.
  5. If granted, confirm the account is discharged and that any automatic collection (wage garnishments, tax refund offsets) has stopped.

Tax and estate consequences

  • Federal student loans discharged due to death or TPD: Generally not taxable income. (Federal Student Aid; see IRS guidance)</n- Private loan forgiveness or discharge can have tax consequences; canceled debt is often treated as taxable cancellation-of-debt (COD) income unless a specific exclusion applies. Consult IRS Publication 525 and Form 982 if you expect cancellation that could be taxable. (IRS Pub. 525)

Practical tips from practice

  • Act quickly: Survivors should notify loan servicers and employers (to stop wage garnishment) and request payoff and discharge instructions.
  • Keep thorough records: date-stamped copies of all paperwork, emails, and phone-call notes with names and badge numbers.
  • Ask about cosigner release options: private lenders sometimes offer release paths that protect cosigners after disability or death.
  • If denied, appeal the decision and ask for a clear explanation in writing.

Common mistakes to avoid

  • Assuming all debts are automatically canceled at death — many are handled by the estate or transferred to a cosigner.
  • Waiting to gather documentation; many discharges require prompt, specific paperwork.
  • Overlooking tax reporting: forgiven debt may be taxable in some cases.

Relevant internal resources

Authoritative sources

  • Federal Student Aid, U.S. Department of Education — studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge
  • Consumer Financial Protection Bureau — consumerfinance.gov
  • IRS Publication 525, Taxable and Nontaxable Income and Form 982 for cancellation-of-debt issues

Disclaimer

This article is educational and not personalized legal, tax, or financial advice. For guidance tailored to your situation, consult your loan servicer, a qualified tax professional, or an attorney.