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Posted in Student Loans
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Question By
milehiguyww

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$30k Student Loan in default but not affecting credit. Should I open a can of worms or keep quiet?
I have a defaulted student loan with a principal balance of $30k plus at least $10k more in accrued interest. I became disabled and had to retire from teaching in 2009. I have been on disability retirement since 2010 through my teachers' pension fund (not through Social Security). I have been considering applying for a Total and Permanent Disability Discharge of my student loans. However, I fear that the criteria to be considered permanently disabled under the TPD Discharge program are substantially greater than the criteria required by my teacher pension plan. In other words, even though I receive a disability retirement pension through my teacher pension plan, I'm not sure I'm "disabled enough" to qualify for a discharge of my student loans.

My defaulted Student Loan does NOT appear on any of my credit reports. It had been on my credit report at one time, but for some reason it dropped off several years ago. At this point, the only collection activity associated with my defaulted student loan is that the Dept of Ed garnishes my federal income tax refund, which rarely exceeds $200.

I have recently been improving my creditworthiness as well as my credit score to the point that I was able to qualify for a small mortgage so that I could partially buy out my siblings’ share of the house we inherited when our mother died. At this point, I would like to address the defaulted student loan, but my pension barely covers my mortgage, medical expenses and living expenses. There’s no way I could afford to start making payments on the $40k to $50k I now owe the Dept of Ed.

I’d like to apply for a TPD Discharge, but if my application is denied, my student loan will be reinstated, which will almost certainly trigger aggressive collection activities and destroy my credit. Part of me says I should just keep quiet, not rock the boat, and hope the collection activity maintains its current minimal level. But the other part of me wants to risk applying for the discharge, and hopefully get out from under this burden. HELP!

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Try for the discharge.  A Dr has to fill out the form that starts the process and he/she can work it in a way that is quite effective.  Mine did.  Otherwise those loans will remain in default accruing interest and eventually, you will receive collection action since those loans can last forever.   

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