Does TPD discharge affect credit score?
The simple act of the debt being forgiven could also change your credit score. After all, your credit mix and amounts owed — two of five credit scoring categories — will be affected by the discharge.
How Student Loan Forgiveness Affects a Credit Score. Credit mix: Those who qualify for loan forgiveness may see a score drop by a few points if the loan was the only installment loan because a credit mix, which shows multiple forms of credit, accounts for 10% of a FICO Score.
If the Department approves your discharge request, we will notify you and the holders of your loans and/or TEACH Grant service obligation of the approval. We will also instruct the loan holders to return any loan payments received on or after your disability date to the person who made the payments.
You can go back to school and get a new Direct Loan or TEACH Grant after getting a TPD discharge. But to do so, you must do the following: Give your school a letter from a doctor of medicine or doctor of osteopathy/osteopathic medicine stating that you are once again able to engage in substantial gainful activity.
After your discharge from the Chapter 13 Bankruptcy, there will remain accounts. These accounts were current prior to the bankruptcy filing, for a period of up to 7 years. This will result in a potentially negative impact on your credit score.
Even when the bankruptcy is discharged—meaning you won't be liable for that debt anymore—it won't be removed from credit reports. The status of the bankruptcy will be updated, but it could still take up to seven to 10 years from the bankruptcy filing date for the bankruptcy to be removed from credit reports.
Warning: There could be tax consequences for debt forgiveness. If a portion of your debt is forgiven by the creditor, it could be counted as taxable income on your federal income taxes. You may want to consult a tax advisor or tax attorney to learn how forgiven debt affects your federal income tax.
Paying off a loan isn't reflected in your credit scores. But it does improve your overall financial picture by reducing your debt-to-income ratio. That may help you qualify for or get a better rate on a home or auto purchase.
If you have both revolving credit (like credit cards) and an installment loan (like a student loan), paying off your student loans will shift your credit mix. This could negatively impact your FICO score.
If you take out any new federal loans within the three year post-discharge monitoring period, your loans will be reinstated. If you don't take out new loans, your discharge will officially go through at the end of those 3 years.
How long does TPD discharge last?
If you are approved for TPD discharge based on Social Security Administration (SSA) documentation or a licensed medical professional's certification, you will be subject to a 3-year post-discharge monitoring period that begins on the date the discharge is approved.
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.
The TPD discharge does not affect the student's eligibility for other federal student aid, such as the Federal Pell Grant or Federal Supplemental Educational Opportunity Grant (FSEOG). Vocational rehabilitation assistance does not affect eligibility for federal student aid.
If you are totally and permanently disabled, you may qualify for a total and permanent disability (TPD) discharge of your federal student loans or TEACH Grant service obligation. If you receive a TPD discharge, you will no longer need to repay your loans or complete your TEACH Grant service obligation.
Can Military Spouses Get Student Loans Forgiven? Currently, there are no student loan forgiveness programs designed specifically for military spouses. However, military spouses can still receive loan forgiveness through conventional federal forgiveness programs.
Most negative information generally stays on credit reports for 7 years. Bankruptcy stays on your Equifax credit report for 7 to 10 years, depending on the bankruptcy type. Closed accounts paid as agreed stay on your Equifax credit report for up to 10 years.
Chapter 7 doesn't have a repayment plan and eliminates most unsecured debts, meaning the creditors can't recoup what they advanced. One of the cons of filing chapter 7 bankruptcy is that it will negatively affect your FICO score for 10 years.
If your County Court Judgment (CCJ) has been discharged, it means that you have satisfied the debt, and the CCJ has been removed from your credit report. Once the CCJ has been removed, the credit reference agency will no longer have information about the CCJ on your credit file.
A 609 dispute letter is actually not a dispute but is simply a way of requesting that the credit bureaus provide you with certain documentation that substantiates the authenticity of the bureaus' reporting.
The 7-year rule means that each negative remark remains on your report for 7 years (possibly more depending on the remark). However, after that period has ended, a remark will most probably fall off of your report.
Can you have a 700 credit score with collections?
Yes, it's possible to achieve a higher credit score even with collections on your report, but it's more challenging. The impact of collections on your credit score diminishes over time, especially if you maintain good credit habits like making payments on time and keeping your credit utilization low.
Loans, medical debt and credit card debt are generally all able to be discharged through bankruptcy. Tax debt, alimony, spousal or child support and student loans are all typically ineligible for discharge.
Some debt relief companies are scams, and even the legit ones are risky and expensive. Some creditors refuse to work with debt relief companies, and even when it's successful, debt relief can do major harm to your credit and raise your income tax bill.
Writing off a debt as bad is not the same as waiving or forgiving a debt. There are different tax consequences for debt forgiveness or waiver and there may also be tax consequences for the debtor. See also: Debt forgiveness by private companies.
As long as your loans were in good standing at the time they were discharged and your accounts are being reported properly to the credit reporting bureaus, you won't see a huge difference in your score. On the other hand, you could see your score drop if your account wasn't in good standing prior to the discharge.
References
- https://anthemtaxservices.com/blog/1099-c-cancellation-of-debt-form
- https://www.investopedia.com/terms/i/identified-shares.asp
- https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge
- https://www.tateesq.com/learn/student-loan-account-closed-due-to-transfer
- https://www.tateesq.com/learn/nelnet-negotiate-payoffs-loan-forgiveness
- https://www.law.cornell.edu/uscode/text/26/108
- https://studentaid.gov/help-center/answers/article/what-happens-if-loan-discharge-app-is-approved
- https://www.creditninja.com/blog/can-you-have-a-700-credit-score-with-collections/
- https://www.equifax.com/personal/education/credit/score/articles/-/learn/what-is-a-good-credit-score/
- https://www.marca.com/en/lifestyle/us-news/personal-finance/2023/12/09/6574b6d2e2704ee6748b4598.html
- https://studentaid.gov/help-center/answers/article/loan-amounts-forgiven-under-pslf-taxable
- https://www.quora.com/My-credit-report-still-shows-my-student-loans-even-though-Ive-paid-them-off-How-do-I-get-them-removed
- https://www.consumerfinance.gov/paying-for-college/student-loan-forgiveness/
- https://www.nyworkerslaw.com/social-security-disability-loan-forgiveness/
- https://www.solosuit.com/posts/student-loans-go-away-seven-years
- https://blog.massmutual.com/planning/getting-student-loan-on-disability
- https://www.consumerfinance.gov/about-us/blog/initial-fresh-start-program-changes-followed-by-increased-credit-scores-for-affected-borrowers/
- https://readysetrepay.org/behind/find.html
- https://www.usatoday.com/money/blueprint/student-loans/do-student-loans-affect-your-credit-score/
- https://www.pbwt.com/bankruptcy-update-blog/the-state-of-student-loan-debt-in-bankruptcy
- https://www.mohela.com/fedLoan-transfer
- https://www.cnn.com/2023/06/30/politics/supreme-court-student-loan-forgiveness-biden/index.html
- https://www.quora.com/Why-would-my-student-loans-show-as-%E2%80%9Cclosed%E2%80%9D-on-my-credit-report-if-I-didnt-pay-anything-on-them-nor-did-I-do-the-loan-forgiveness-programs-Im-confused
- https://www.investopedia.com/forgiven-student-loans-on-credit-reports-7371496
- https://answerconnect.cch.com/topic/5762b86e7c6b1000871890b11c2ac4f102/discharge-of-debt
- https://www.npr.org/2023/08/31/1197122000/a-big-group-of-student-loan-borrowers-are-learning-their-debt-has-been-forgiven
- https://thephiladelphiabankruptcyattorney.com/1384/irs-form-1099-c-bankruptcy/
- https://www.savingforcollege.com/article/how-student-loans-affect-your-federal-income-taxes-this-year
- https://www.sofi.com/learn/removing-student-loans-from-credit-report/
- https://studentaid.gov/help-center/answers/article/how-to-apply-to-have-loans-discharged
- https://www.mohela.com/pslf
- https://www.ed.gov/news/press-releases/biden-harris-administration-announces-additional-49-billion-approved-student-debt-relief
- https://www.tateesq.com/learn/defaulted-student-loans-not-on-credit-report
- https://educationdata.org/what-happens-if-student-loan-debt-is-canceled
- https://www.clevelandbankruptcyattorney.com/bankruptcy-debt-relief/student-loans/student-loan-discharge-vs-student-loan-forgiveness/
- https://studentaid.gov/help-center/answers/article/what-happens-when-i-submit-pslf-tepslf-form
- https://www.sparrowfi.com/blog/how-to-get-student-loan-forgiveness-for-military-spouses
- https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized
- https://www.cnn.com/cnn-underscored/money/average-student-loan-debt
- https://www.investopedia.com/the-impact-of-cancelling-student-debt-5101053
- https://www.debt.org/bankruptcy/how-will-filing-bankruptcy-impact-my-credit-score/
- https://studentaid.gov/manage-loans/forgiveness-cancellation
- https://www.cancelmystudentdebt.org/total-and-permanent-disability
- https://www.ptla.org/disability-discharge-closer-look
- https://www.forbes.com/sites/adamminsky/2022/12/22/when-will-you-receive-student-loan-forgiveness-timelines-for-4-programs/
- https://missouriindependent.com/2024/02/29/mohela-faces-accusations-it-mismanaged-federal-student-loan-forgiveness-program/
- https://www.whitehouse.gov/briefing-room/statements-releases/2024/02/21/fact-sheet-president-biden-cancels-student-debt-for-more-than-150000-student-loan-borrowers-ahead-of-schedule/
- https://www.talkaboutdebt.co.uk/knowledge-hub/ccj-discharged-mean/
- https://ptsdlawyers.com/student-loan-forgiveness-veterans-permanent-total-disability/
- https://mohela.com/
- https://www.bankrate.com/loans/student-loans/borrowers-face-stress-regrets-as-forbearance-ends/
- https://www.studentloanplanner.com/how-long-does-pslf-take-process/
- https://crediterrorlaw.com/services/duplicate-debt-reporting/
- https://files.eric.ed.gov/fulltext/ED610484.pdf
- https://www.bankrate.com/loans/student-loans/tips-for-navigating-student-loans-on-your-taxes/
- https://www.ed.gov/news/press-releases/biden-harris-administration-approves-12-billion-loan-forgiveness-over-150000-save-plan-borrowers
- https://www.wtaxattorney.com/tax-problems/forgiven-liabilities/
- https://www.studentloanplanner.com/how-to-get-mohela-student-loan-forgiveness/
- https://studentaid.gov/articles/3-ways-qualify-total-permanent-disability-discharge/
- https://disabilitydischarge.com/tpd-101
- https://www.investopedia.com/here-s-who-would-benefit-from-biden-s-new-attempt-at-student-loan-forgiveness-8410655
- https://studentaid.gov/articles/your-loan-was-transferred-whats-next/
- https://www.debt.org/students/student-loan-discharge-vs-student-loan-forgiveness/
- https://www.ato.gov.au/forms-and-instructions/company-tax-return-2023-instructions/appendixes/appendix-5-commercial-debt-forgiveness
- https://studentaid.gov/help-center/answers/article/status-of-pslf-application
- https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/income-and-deductions-for-business/deductions/deductions-for-unrecoverable-income-bad-debts
- https://www.experian.com/blogs/ask-experian/are-debt-relief-programs-legitimate/
- https://www.capitalone.com/learn-grow/money-management/how-long-does-bankruptcy-stay-on-your-credit-report/
- https://www.whitehouse.gov/publicserviceloanforgiveness/
- https://support.cch.com/kb/solution/how-do-i-report-cancellation-of-debt-reported-on-form-1099-c-when-using-taxwise
- https://www.irs.gov/newsroom/understanding-federal-tax-obligations-during-chapter-13-bankruptcy
- https://www.consumerfinance.gov/ask-cfpb/do-student-loans-affect-my-credit-score-en-581/
- https://www.washingtonpost.com/education/2023/12/12/mohela-lawsuit-public-service-loan-forgiveness/
- https://www.investopedia.com/what-happens-when-your-student-loans-are-forgiven-7152753
- https://cred.club/check-your-credit-score/articles/how-to-raise-your-credit-score-by-200-points-in-30-days
- https://www.isac.org/students/after-college/documents/Default_FAQs_College.pdf
- https://time.com/personal-finance/article/how-to-apply-for-student-loan-forgiveness/
- https://www.mohela.com/DL/resourceCenter/LoanForgivenessDischarge.aspx
- https://studentaid.gov/announcements-events/sweet-settlement?source=email
- https://www.forbes.com/sites/adamminsky/2024/03/01/student-loan-forgiveness-reversals-cause-growing-panic-for-borrowers/
- https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-relief-program-and-how-do-i-know-if-i-should-use-one-en-1457/
- https://studentaid.gov/help-center/answers/article/how-long-does-tpd-discharge-app-process-take
- https://studentaid.gov/help-center/answers/article/how-to-stop-tax-refund-or-other-federal-payments-from-being-withheld
- https://www.savingforcollege.com/article/student-loan-forgiveness
- https://totallendersolutions.com/how-to-write-a-zero-balance-demand-letter/
- https://disabilitydischarge.com/MonitoringPeriod
- https://www.forbes.com/sites/adamminsky/2023/10/19/didnt-get-a-student-loan-forgiveness-email-7-possible-reasons-why/
- https://www.equifax.com/personal/education/credit/report/articles/-/learn/how-long-does-information-stay-on-credit-report/
- https://www.bankrate.com/personal-finance/debt/debts-discharged-in-bankruptcy/
- https://www.investopedia.com/terms/d/debt-discharge.asp
- https://www.moneylion.com/learn/why-is-my-credit-score-so-low-if-i-have-no-debt/
- https://www.chase.com/personal/credit-cards/education/basics/what-happens-to-debt-after-7-years
- https://www.mohela.com/DL/ResourceCenter/PSLFServicerTransfer.aspx
- https://www.irs.gov/newsroom/what-if-my-debt-is-forgiven
- https://thecollegeinvestor.com/39830/student-loan-automatically-discharged-disability/
- https://smartasset.com/student-loans/how-does-student-loan-forgiveness-affect-your-finances
- https://cck-law.com/veterans-law/is-my-va-disability-rating-permanent/
- https://www.peoplesbankmtg.com/news/credit-score-after-chapter-13-discharge-what-happens/
- https://www.bankrate.com/loans/student-loans/private-student-loan-bankruptcy/
- https://slate.com/human-interest/2023/03/student-loan-forgiveness-supreme-court-decision.html
- https://www.ed.gov/news/press-releases/us-department-education-announces-withholding-payment-student-loan-servicer-part-accountability-measures-harmed-borrowers
- https://www.forbes.com/sites/adamminsky/2023/08/03/student-loan-forgiveness-just-got-easier-for-these-borrowers/
- https://www.nerdwallet.com/article/loans/student-loans/what-happens-next-if-student-loans-are-forgiven-2
- https://vaclaimsinsider.com/90-percent-disabled-veteran-student-loan-forgiveness/
- https://www.disabilitydischarge.com/faqs
- https://www.lexingtonlaw.com/blog/credit-101/what-is-609-letter.html
- https://www.equifax.com/personal/education/credit/score/articles/-/learn/why-credit-scores-may-drop-after-paying-off-debt/
- https://www.whitehouse.gov/briefing-room/statements-releases/2023/01/27/fact-sheet-biden-harris-administration-releases-new-data-showing-26-million-people-in-all-50-states-applied-or-were-automatically-eligible-for-one-time-student-debt-relief/
- https://www.tateesq.com/learn/pslf-how-long-process
- https://www.sparrowfi.com/blog/why-did-my-credit-score-drop-after-paying-off-student-loans