The U.S. Department of Education makes or guarantees federal student loans, including Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Federal Perkins Loans. Under certain circumstances, these types of federal student loans can be forgiven, discharged, or cancelled. Once a loan is forgiven, discharged, or cancelled, it is wiped out and you are not required to repay the debt.
National Student Loan Data System
You can find details about your federal student loans, including the loan amounts, outstanding balances, the status of various loans, and disbursements through the National Student Loan Data System, which is the U.S. Department of Education’s central database for federal student aid.
Private student loans may be forgiven, discharged, or cancelled in some limited cases. (Private student loans are student loans that are not made or guaranteed by the U.S. Department of Education.) Whether or not there are any forgiveness, discharge, or cancellation options for a particular private student loan depends on the lender and the loan agreement.
Federal Student Loan Forgiveness, Discharges, and Cancellation
There are certain situations when you can have your federal student loan forgiven, discharged, or cancelled. Closed School Discharge
Direct Loans, FFEL Program loans, and Perkins Loans can be discharged if your school closes at the time you are enrolled and you don’t complete your program because of it. (Students who are on an approved leave of absence when the school closed, are considered as “enrolled.”)
Also, if your school closes within 120 days after you withdraw, you may be eligible for a discharge of your federal student loans.
Total and Permanent Disability Discharge
Total and Permanent Disability discharges are available for Direct Loans, FFEL program loans, and Perkins Loans. A Total and Permanent Disability discharge can also eliminate the requirement that you finish a TEACH Grant service obligation. To get this type of discharge, you’ll have to prove you’re totally and permanently disabled to the U.S. Department of Education.
When someone dies, his or her federal student loans (Direct Loans, FFEL program loans, and Perkins Loans) can be discharged. When it comes to parent PLUS loans, the loan can discharged if:
- the borrower dies, or
- the student (who the borrower took the loan out for) dies.
The main requirement to get this discharge is that you must be able to provide a certified copy of the death certificate to the school (Perkins Loans) or to the loan servicer (Direct Loans or FFEL Program loans).
Discharge in Bankruptcy
Some borrowers are able to discharge their federal student loans in a Chapter 7 or Chapter 13 bankruptcy. You must convince the bankruptcy court that repaying the loans would cause an “undue hardship” on you and your dependents. This type of discharge is rare. In most cases, federal student loans are not discharged in bankruptcy and you must repay them even after a bankruptcy is complete.
False Certification of Student Eligibility or Unauthorized Payment Discharge
You may be eligible to get a discharge of your Direct Loans or FFEL Program loans if the school you went to: falsely certified that you met the criteria for the loan based on your ability to benefit from its training (you didn’t meet the eligibility requirements); signed your name to the loan documents without your permission; or certified your eligibility for the loan, but you don’t meet the requirements for employment in the occupation that you were being trained for because of a physical or mental condition, age, criminal record, or other reason.
You may also be eligible for this type of discharge if:
- you are the victim of identity theft, or
- your school endorsed your loan check or signed your electronic funds transfer authorization without your knowledge (but not if the loan proceeds were given to you or applied to charges that you owed to the school).
Unpaid Refund Discharge
You might be eligible for a discharge of your Direct Loan or FFEL Program loan if you left school, but the school didn’t refund money back to the U.S. Department of Education or the lender that provided the loan. You will only receive a discharge for up to the amount that the school was required to return.
Teacher Loan Forgiveness
Teachers who work full-time in a low-income school or educational service agency for five consecutive years (and meet certain other eligibility requirements) may be able to have as much as $17,500 of their Direct Loans or FFEL Program loans forgiven.
Public Service Loan Forgiveness
Direct Loan borrowers who work in public service may be eligible to have their loans forgiven under the Public Service Loan Forgiveness (PSLF) program. To qualify for PSLF, you must make 120 qualifying payments under certain repayment plans and meet other eligibility requirements.
Perkins Loan Cancellation and Discharge
Borrowers with Perkins Loans who work in certain areas of public service (such as teachers and police officers) or in particular occupations (such as nurses and medical technicians) may be eligible to cancel all or part of their loans. A percentage of the loan is canceled for each completed year of service. In some circumstances, the entire loan is cancelled.
Where to Learn More About Student Loan Forgiveness, Discharges, and Cancellation
If you have private student loans, contact your lender or loan servicer to find out if there are any forgiveness, discharge, or cancellation programs available.
Am I Eligible for Student Loan Forgiveness?
According to the Consumer Financial Protection Bureau (a government agency), over 41 million Americans owed more than $1.2 trillion in collective student loan debt as of September 2015. Student loans ordinarily have to be repaid even if you don’t get a degree, are unemployed, or don’t earn a lot of money.
There are some circumstances, though, when federal student loans can be forgiven, cancelled, or discharged. (If a loan is forgiven, cancelled, or discharged, the debt is wiped out and the borrower is no longer required to repay it.)
National Student Loan Data System
To find information about your various federal student loans, including loan amounts, how much you owe, loan statuses, and disbursements, go to the National Student Loan Data System (NSLDS) website, which is the U.S. Department of Education’s central database for student aid.
Sometimes forgiveness, cancellation, and discharge options are available for private student loans as well. For example, a private lender may offer a disability or death discharge, but it is not required to do this under the law. Whether or not any forgiveness, cancellation, or discharge options are available for private student loans depends on the lender, the loan contract, and the borrower’s individual circumstances.
The Difference Between Federal Student Loans and Private Student Loans
Federal student loans are made or guaranteed by the U.S. Department of Education. Private student loans, on the other hand, are not.
Forgiveness, Cancellation, and Discharge of Federal Student Loans
The following are the available forgiveness, cancellation, and discharge options for federal student loans.
- Closed School Discharge
- Total and Permanent Disability Discharge
- Death Discharge
- Discharge in Bankruptcy
- False Certification of Student Eligibility or Unauthorized Payment Discharge
- Unpaid Refund Discharge
- Teacher Loan Forgiveness
- Public Service Loan Forgiveness
- Perkins Loan Cancellation and Discharge
- Debt Relief for Corinthian Colleges Students
Closed School Discharge
Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Federal Perkins Loans may be eligible for a discharge in either of the following cases.
- If your school closes while you’re enrolled, and you don’t finish your program due to the closing. (Those students who were on an approved leave of absence are considered enrolled.)
- If the school closes within 120 days after you withdraw from school.
Borrowers won’t qualify for a discharge of their federal student loans in the following circumstances, even if the school closes.
- You withdraw, but you did this more than 120 days before the school closed.
- You are working to complete a similar program at a different school through a teach-out agreement with the school or by transferring the academic credits or hours that you earned at the closed school to a different school (or in any other similar way).
- You completed the program (including all coursework) at the closed school, even in cases where you haven’t received a diploma or a certificate.
What’s a Teach-Out Agreement?
A teach-out agreement is an agreement between a closed school and other schools (that are still open) to ensure that the students from the closed school are able to finish their programs of study.
To apply for this type of discharge, contact the loan servicer (the company you make your payments to) to begin the application process.
Total and Permanent Disability Discharge
A Total and Permanent Disability discharge is available for Direct Loans, FFEL Program loans, and/or Federal Perkins Loans. This type of discharge can also relieve you from having to complete a TEACH Grant service obligation.
To get a discharge, the borrower must provide proof to the U.S. Department of Education showing that he or she is totally and permanently disabled.
There are three ways to prove total and permanent disability for the purposes of this discharge:
- Veterans can submit documentation from the U.S. Department of Veterans Affairs (VA), which shows that the VA has determined that the veteran is unemployable due to a service-connected disability.
- By submitting a Social Security Administration (SSA) notice of award for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits (if you receive these types of benefits) that states your next scheduled disability review will be within 5-7 years from the date of your most recent SSA disability determination.
- By submitting certification from a doctor that states you are totally and permanently disabled. The doctor has to certify that you cannot participate in any substantial gainful activity due to a medically determinable physical or mental impairment that (1) can be expected to result in death, (2) has lasted for a continual period of at least 60 months, or (3) is expected to last for a continual period of at least 60 months.
For detailed information about applying for a Total and Permanent Disability discharge go here.
To apply for this type of discharge, contact your loan servicer.
Federal student loans (Direct Loans, FFEL Program loans, and Perkins Loans) can be discharged upon the borrower’s death.
For parent PLUS loan borrowers, the federal student loans may be discharged if:
- the borrower dies, or
- the student on whose behalf the borrower obtained the loan dies.
For the loan to be discharged, the deceased’s family member (or other representative) must provide a certified copy of the death certificate to:
- the loan servicer (Direct Loans or FFEL Program loans) or
- to the school (Perkins Loans).
To get further information about how to apply for this type of discharge, contact the loan servicer.
Discharge in Bankruptcy
Some borrowers are eligible to have their federal student loans discharged by completing a Chapter 7 or Chapter 13 bankruptcy—though this type of discharge is not common.
To get a discharge, you’ll have to show the bankruptcy court that repaying the loans would impose an undue hardship on you and your dependents. This must be decided in an adversary proceeding (a separate action in the bankruptcy case).
While courts use different methods for determining undue hardship, they often use a three-part test. Under this test, the borrower must meet certain criteria to be granted a discharge of federal student loans.
The Three-Part Test
• The poverty part of the test: The borrower must show that he or she would not be able to maintain a minimal standard of living if he or she had to repay the loans.
• The persistence part of the test: The borrower must demonstrate that his or her financial situation is probably going to continue for a significant part of the repayment period.
• The good faith part of the test: The borrower must have made a good-faith effort to repay the loans.
If the borrower’s situation meets the test requirements (and/or whatever other factors the court considers important), the loans are discharged in the bankruptcy and don’t have to be repaid.
False Certification of Student Eligibility or Unauthorized Payment Discharge
Direct Loans and FFEL Program loans can generally be discharged in the following four situations.
- Ability to benefit. The school falsely certified that you were eligible to get the loan based on your “ability to benefit” from its training, but you did not meet the applicable eligibility requirements.
- Forgery. The school put your signature on the loan application or promissory note (and you didn’t authorize it), or the school endorsed your loan check or signed your electronic funds transfer authorization without you knowing about it (unless the loan proceeds were given to you or used to pay off charges that you owed to the school).
- Identity theft. You were a victim of identity theft and the school certified that you were eligible for the loan as a result of this crime.
- Disqualifying status. The school certified your eligibility, but you are not able to get a job in the occupation that you were being trained for due to a physical or mental condition, age, criminal record, or another acceptable reason.
Unpaid Refund Discharge
When a student leaves school early (withdraws), but the school doesn’t refund the money owed to the U.S. Department of Education or the lender (whichever entity provided the loan), the student might then be eligible for a discharge of all or part of a Direct Loan or FFEL Program loan.
Example: Say you took out a federal student loan to pay for school, but withdrew once you completed 30% of a semester. The school was then required to refund 70% of the federal student loan back to the government. If it didn’t do this, you can apply for a discharge of 70% of the federal student loan (plus interest and fees). You still have to repay 30% of the loan amount (since you finished 30% of the semester), plus any interest and fees as applicable.
Teachers who are new borrowers, who teach at a school that serves low-income families (or at an educational service agency that serves low-income families), and meet other eligibility criteria are potentially eligible to as much as $17,500 of their federal student loans (Direct Loans and FFEL Program loans) forgiven. (PLUS loans are not included in this forgiveness program.)
What is a New Borrower?
If you didn’t have an outstanding balance on a Direct Loan or FFEL Program loan on October 1, 1998, or on the date you obtained a Direct Loan or FFEL Program loan after October 1, 1998, then you are considered a “new borrower.”
Perkins Loan Teacher Cancellation Program
There is a separate program for teacher cancellation for Perkins Loans. See below for details.
To qualify for loan forgiveness under the Teacher Loan Forgiveness program, you must have been teaching full-time in a particular type of elementary or secondary school or educational service agency for five complete and consecutive years.
What is an Educational Service Agency?
An “educational service agency” is an organization that is public (not private) and is a regional multiservice agency authorized under state law to develop, manage, and provide services (or programs) to local education agencies, like public school districts.
Teachers Who Began Service Prior to October 30, 2004
Teachers who began their five complete and consecutive years of qualifying teaching service prior to October 30, 2004, may be eligible for up to $5,000 in loan forgiveness if:
- he or she was teaching full-time at an elementary school and demonstrated knowledge and teaching skills in reading, writing, math, and other areas of the elementary school curriculum; or
- he or she was teaching full-time at a secondary school and taught in a subject area that corresponded to his/her academic major.
Teachers who began their five complete and consecutive years of qualifying teaching service before October 30, 2004, may be eligible for up to $17,500 in loan forgiveness if:
- he or she was a highly qualified full-time math or science teacher at a qualifying secondary school; or
- he or she was a highly qualified special education teacher providing special education to children with disabilities, and taught children with disabilities that were relevant to his/her special education training, and showed knowledge and teaching skills in the content areas of the curriculum that he/she taught.
Teachers Who Began Service On or After October 30, 2004
Teachers who began their five complete and consecutive years of qualifying teacher service on or after October 30, 2004, may be eligible for up to $5,000 in loan forgiveness if he or she was a highly qualified full-time elementary or secondary school teacher.
A teacher may be eligible for up to $17,500 in loan forgiveness if he or she was:
- a highly qualified full-time math or science teacher at a qualifying secondary school; or
- a highly qualified special education teacher whose main duty was to provide special education to children with disabilities, and taught children with disabilities that were relevant to his/her area of special education training, and showed knowledge and teaching skills in the content areas of the curriculum that he/she taught.
What’s a Highly Qualified Teacher?
“Highly qualified teachers” are public elementary or secondary school teachers that:
- have full state certification as a teacher (which includes certification gained through alternative routes to certification) or
- who passed the state teacher licensing examination, as well as are licensed to teach in that state, except that teachers who teach in a public charter school must meet the requirements set forth in the state’s public charter school law; and
- have not had certification or licensure requirements waived on an emergency, temporary, or provisional basis.
Plus, an elementary school teacher who is new to the profession is considered “highly qualified” in cases where the teacher also:
- has a bachelor’s degree (at least); and
- has passed a rigorous state test, thus
- showing subject knowledge and teaching skills in reading, writing, math, and other areas of the basic elementary school curriculum. (This might consist of passing a state-required certification or licensing test or tests in reading, writing, math, and other areas of the general elementary school curriculum).
A middle or secondary school teacher who is new to the profession is considered “highly qualified” if the teacher:
- has a bachelor’s degree (at least); and
- has shown a high level of competency in each of the academic subjects that the teacher teaches by passing a rigorous state academic subject test in each of the academic subjects that the teacher teaches (which might consist of a passing level of performance on a state-required certification or licensing test or tests in each of the academic subjects that the teacher teaches); or
- by successfully completing an academic major, a graduate degree, course work equivalent to an undergraduate academic major, or advanced certification or credentialing in each of the academic subjects that the teacher teaches.
An elementary, middle, or secondary school teacher who is not new to the profession is considered “highly qualified” if he or she:
- has a bachelor’s degree (at least); and
- meets the standards of a new-to-the-profession elementary, middle, or secondary school teacher;
- or shows that he or she is competent in all the academic subjects that the teacher teaches based on a uniform state standard.
To qualify for teacher loan forgiveness, you must meet the following criteria.
- You must be a new borrower.
- You can’t be in default on a subsidized or unsubsidized loan. (You may become eligible when you have made satisfactory repayment arrangements with the holder of the defaulted loan.)
- You must have been a full-time teacher for five complete and consecutive academic years at an eligible elementary or secondary school, with one of those years being after the 1997–1998 academic year. (Teaching for an educational service agency can be counted toward the required five years only if the consecutive five-year period includes qualifying service at an eligible educational service agency performed after the 2007-2008 academic year. Also, the five-year period can include any combination of qualifying teaching service at an eligible elementary school or secondary school or an eligible educational service agency.)
- The loans you want forgiven must have been made prior to the end of the five years of qualifying teaching service.
- Time spent teaching to get benefits through AmeriCorps won’t count toward the required five years of teaching for this program.
In addition, the elementary or secondary school (or educational service agency) where you taught must:
- be located in a school district that qualifies to receive funds under Title I of the Elementary and Secondary Education Act of 1965, as amended
- have been selected by the U.S. Department of Education based on the fact that more than 30% of the school’s total enrollment is comprised of children who qualify for services provided under Title I; and
- be listed in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits (“Annual Directory”). (If the directory isn’t available before May 1st, you can use the previous year’s directory.)
(This basically means the school or agency serves low-income families.)
When a school or agency meets these requirements for at least one year of relevant teaching service, but not during subsequent years, subsequent years of teaching at the school count toward the required five complete and consecutive academic years of teaching.
Also, all elementary and secondary schools that are run by the Bureau of Indian Education (or that operate on Indian reservations and are run by Indian tribal groups under contract with the Bureau of Indian Education) will qualify as schools serving low-income students, and are qualifying schools under this loan forgiveness program—even if not listed in the Annual Directory.
Teachers who are unable to finish an academic year of teaching may be able to count that year towards the required five complete and consecutive academic years if he or she:
- completed at minimum half of the academic year
- fulfilled his or her contractual requirements for the academic year (per the employer’s requirements) for the purposes of salary increases, tenure, and retirement; and
- couldn’t complete the academic year because: (1) he or she returned to postsecondary education (at least half-time) in an area of study that is directly related to his or her teaching service; or (2) had a condition and was authorized to leave under the Family and Medical Leave Act of 1993 (FMLA); or (3) was called or ordered to active duty for longer than 30 days as a member of a reserve component of the armed forces.
To apply for teacher loan forgiveness, submit an application to your loan holder or loan servicer.
Those who work in public service and have Direct Loans may be eligible for forgiveness of those loans under the Public Service Loan Forgiveness (PSLF) program. (FFEL Program loans and Perkins loans may be consolidated into a new Direct Consolidation Loan to qualify for PSLF. Though, it’s possible to lose other benefits available under those programs by consolidating.)
To qualify for loan forgiveness under the PSLF program, you must work full-time (this means you meet your employer’s definition of full time or you work at least 30 hours per week, whichever is greater) for one of the following types of employers:
- the government (federal, state, local, or tribal)
- not-for-profit organizations that are tax-exempt under Internal Revenue Code § 501(c)(3)
- other not-for-profit organizations that provide particular types of qualifying public services (such as emergency management, military service, public safety, law enforcement, and public interest law services, among others)
- AmeriCorps or Peace Corps (in a full-time position).
Employers that do not qualify under the PSLF program include, among others:
- labor unions
- political organizations (partisan)
- for-profit organizations, and
- non-profit organizations that are not tax-exempt under Internal Revenue Code § 501(c)(3) and don’t provide a qualifying service.
To be eligible for loan forgiveness under the PSLF program, 120 payments must be made on the Direct Loans while the borrower is working for a public service organization or serving in AmeriCorps or Peace Corps. (Borrowers also need to be employed full-time by a public service organization or serving in a full-time AmeriCorps or Peace Corps position at the time they apply for loan forgiveness, and at the time the remaining principal and accrued interest are forgiven.)
Only payments made under certain repayment plans count toward the required 120 payments.
The 120 qualifying monthly payments don’t need to be consecutive, but they do have to meet the following criteria.
- The payments must be made after October 1, 2007.
- The payments must be made under a qualifying repayment plan (see below).
- The payments must be for the full amount due as shown on the bill.
- The payments must be made no later than 15 days after the due date.
- The payments must be made while the borrower is employed full-time by a qualifying employer.
Generally, you only get credit for one payment per month even if you pay more than is due that month. (However, there are specific rules for borrowers who are AmeriCorps or Peace Corps volunteers that allow them to use their Segal Education Award or Peace Corps transition payment to make a single lump-sum payment that counts, in some cases, for up to 12 qualifying PSLF payments.)
Qualifying monthly payments do not include payments made:
- while loans are in an in-school status
- while loans are in a grace period
- during a deferment
- during a forbearance, or
- while a loan is in default.
Qualifying Repayment Plans
All of the income-driven repayment plans (plans that base the monthly payment on income) and the ten-year Standard Repayment Plan count as qualifying repayment plans for PSLF.
The Income-Driven Repayment Plan
- Income-Based Repayment Plan (IBR Plan)
- Income-Contingent Repayment Plan (ICR Plan)
- Pay As You Earn Repayment Plan (PAYE Plan)
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)
To find out more about each of these types of repayment plans, go here.
Note: While the ten-year Standard Repayment Plan is a qualifying plan for the PSLF program, you won’t receive PSLF unless you make the majority of your 120 qualifying monthly payments under an income-driven repayment plan. This is because if you are on the ten-year Standard Repayment Plan for the entire time you are working toward PSLF, you won’t have any remaining balance remaining to forgive after you have made 120 qualifying PSLF payments. (Since you have to make 120 qualifying monthly payments for PSLF, it takes at least 10 years to become eligible.)
To apply for forgiveness under this program, submit an application to your loan servicer. (The application is currently under development and will be available before October 2017. This is when forgiveness of student loan balances under this program first begins.)
Borrowers who perform certain types of public service or are employed in certain occupations and have federal Perkins Loans may be eligible to cancel their loans. For each year of service completed, a percentage of the loan may be canceled. The total percentage that can be canceled will depend on the type of service performed. Sometimes, the full loan can be cancelled.
You may be eligible to cancel all or part of your loan if you perform one of the following public services or are employed as, among other things, a:
- volunteer in the Peace Corps or ACTION program (including VISTA)
- teacher (you must work full-time teaching at a low-income school, as a special education teacher, or teaching in certain subject areas such as math, science, foreign languages, bilingual education, or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state)
- military servicemember (who serves in an area of hostilities)
- nurse or medical technician
- police officer or corrections officer
- Head Start staff member
- child or family services worker, or
- professional provider of early intervention services.
To view a chart of the situations where a Perkins Loan can be forgiven, go here.
The cancellation rate for each completed academic year of full-time teaching or for each year of otherwise qualifying full-time service is generally:
- 15% for each of the first and second years
- 20% for each of the third and fourth years, and
- 30% for the fifth year.
For Head Start staff members, the cancellation rate is 15% of the original principal loan amount, plus the interest that accrued during the year, for each completed school year.
For volunteer service, the cancellation rate is:
- 15% of the original principal loan amount (plus the interest on the unpaid balance accruing during the year of qualifying service) for each of the first and second 12-month periods of service, and
- 20% of the original principal loan amount (plus the interest on the unpaid balance accruing during the year of qualifying service) for each of the third and fourth 12-month periods of service.
To apply for Perkins Loan cancellations, contact the school that you were attending when you received the loan. (Or you can complete the application you should have received from your loan servicer.)
Debt Relief for Corinthian Colleges Students
Students who attended Corinthian colleges may be eligible for federal student loan forgiveness in the following circumstances.
- You attended a Corinthian school (Everest, WyoTech, or Heald) that closed on April 27, 2015. (This is a special type of closed school discharge.)
- You think the Corinthian school defrauded you or that the school otherwise engaged in actions that violated applicable state law, even if the school didn’t close. (This is called a “borrower defense to repayment.”)
Forbearances For Corinthian Colleges Borrowers
Some Corinthian colleges students are eligible for a forbearance (which means you are temporarily allowed to stop repaying your loans or, if your loan is in default, collections will be stopped) while your claim is pending. (However, interest will continue to accrue.) To learn more about forbearances and how to apply for one, go to the Corinthian site for an explanation.
Closed School Discharge
To qualify for this type of closed school discharge:
- You must not have finished your program at a Corinthian school.
- You must not have already transferred your Corinthian credits to another school in a similar program.
- Note: Instead of getting this type of closed school discharge, you may transfer your credits to a comparable program offered by another school.
- However, if you think you might have a claim against the school based on state law (for example, fraud), you can pursue a discharge based on a defense to repayment, even if you already transferred your credits to a different school.
- You were attending the school at the time it closed, or you withdrew on or after June 20, 2014.
- Note: Closed school loan discharges ordinarily only apply to students who withdraw (without completing their program) within 120 days of the school’s closing date, or who were attending when the school closed. However, when it comes to Corinthian students, the Secretary of Education extended the time frame to include any Corinthian student who withdrew from one of its closed schools on or after June 20, 2014.
To apply for this type of relief, contact your loan servicer and ask about the application process for getting your loan discharged. Or you may complete and return the “Closed School Loan Discharge Application” that your servicer should have sent you. A copy of the application is online.
Discharge Based on Borrower Defense to Repayment (For Victims of Fraud or Other Violations of State Law
Student loan borrowers who attended a Corinthian school (Everest, WyoTech, or Heald) and think they were defrauded or that the school otherwise violated applicable state law, might be eligible for loan forgiveness (a discharge) based on a defense to repayment–even if the school did not close.
To learn about how to submit a claim and what materials must be submitted to apply for this type of discharge.
Once the required information is submitted, the loans are placed in forbearance, and collections will stop on any defaulted loans while the claim is reviewed. (Interest will still accrue while the claim is evaluated.)
What To Do While a Forgiveness, Cancellation, or Discharge Application Is Pending
Those who apply for forgiveness, cancellation, or a discharge of a federal student loan should continue making payments on the loan while the application is pending. This will prevent the loan from going into default or accruing more interest.
Once the borrower is granted loan forgiveness, cancellation, or a discharge, it’s not necessary to make payments for that portion of the loan that was forgiven, cancelled, or discharged.
In some cases, the U.S. Department of Education might have to refund some or all of the payments made on the loan. In addition, the following things may occur.
Any negative reporting that the loan servicer made to the credit reporting agencies that is related to a default might be deleted.
The discharge may eliminate a default status (if the loan was in default).
The borrower will regain eligibility for additional federal student aid (if he or she hasn’t defaulted on other loans).
Getting a Forbearance While An Application is Pending
Some student loan borrowers might be eligible for a forbearance while the application for loan forgiveness, cancellation, or a discharge is being reviewed.
For example, for a Direct Subsidized Loan, Direct Unsubsidized Loan, Federal Subsidized Stafford Loan, or Federal Unsubsidized Stafford Loan, the loan servicer should grant a forbearance while the application is under review.
For those with Perkins Loans, the school should automatically defer the loans while the borrower is performing service that qualifies for a loan cancellation (for example, say you are a teacher in a low-income school). To find out more about this, ask the school.
Appealing a Denial of An Application
Most of the time, it’s not possible to appeal a denial of an application for federal student loan forgiveness, cancellation, or a discharge. (This means the borrower remains responsible for repayment of the loan after the application is denied.)
However, student loan borrowers can appeal a denial to the U.S. Department of Education in two cases:
- false certification and
- forged signature discharges.
Where to Learn More About Federal Student Loan Forgiveness, Cancellation, and Discharges
Learn more about federal student loan forgiveness, cancellation, and discharge options.
Student Loan Forgiveness, Cancellation, and Discharges
When it comes to private student loans, forgiveness, cancellation, and discharge programs are not generally available.
Lenders sometimes offer specific forgiveness programs, but the availability of depends on:
- the lender’s policies
- the particular loan agreement, and
- your financial situation.
To find out if there are any forgiveness, cancellation, or discharge options for your private student loans, contact your loan servicer or lender directly.
Even if your lender doesn’t have any forgiveness, cancellation, or discharge programs, it might offer a repayment option that might help your situation.