Student Loan Relief: Canceling Your Loans

If you have federal student loans and you meet specific criteria, you might qualify for loan forgiveness.

These days, it’s common to be facing overwhelming student loan debt. If you’re eligible, though, you can get rid of your federal student loans through a discharge, cancellation, or forgiveness program. To qualify for a particular program, you must meet specific criteria, take certain steps, and meet some conditions.

If you qualify for one of the following programs, your federal student loans will be forgiven, canceled, or discharged. Here’s a summary of each program, with more details below.

  • Closed school discharge. You might qualify for a closed school discharge if you couldn’t complete your program because your school closed.
  • False certification discharge. If your school falsely certified your eligibility to receive a loan and you meet other eligibility requirements, you can qualify for a discharge.
  • Unpaid refund discharge. You can generally discharge all or a portion of your loans if you never attended the school or withdrew from the school, but the school didn’t refund the loan money.
  • Borrower defense to repayment. If your school misled you or engaged in other misconduct in violation of state laws that convinced you to enroll or remain enrolled—and you can prove it—you can qualify for a discharge of the federal student loans you took out to attend the school.
  • Total and permanent disability discharge. If you're totally and permanently disabled, you might qualify for a discharge.
  • Public service loan forgiveness. Under this program, the remaining balance on your eligible loans is forgiven after you make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
  • Teacher loan forgiveness. If you work as a teacher, full-time for five complete and consecutive academic years in a low-income school or educational service agency—and you meet other qualifications—you might qualify to have up to $17,500 forgiven.
  • Perkins loan cancellation and discharge. You might be eligible to have all or a portion of your Federal Perkins Loan canceled based on your employment, like if you teach in a qualifying school, or you're in a volunteer service, like if you serve in the Peace Corps.
  • Death discharge. A student’s death discharges any outstanding amount owed on federal student loans, including PLUS loans.
  • Bankruptcy discharge. Though this kind of discharge is uncommon, if you can prove that repaying your student loans would cause an undue hardship, you can have your student loans discharged by filing for bankruptcy.

Closed School Discharge

For-profit schools are well known for using glowing descriptions of future careers and high salaries to convince potential students to take out loans to attend, only to have the schools close before the students can finish the programs. If this sounds like something that happened to you, you might be able to discharge your loans.

You can discharge a Federal Family Education Loan (FFEL), a Direct Loan, or a Perkins Loan if you were unable to complete a program because a school closed:

  • while you were enrolled and you didn’t finish your program due to the closure
  • while you were on an approved leave of absence, or
  • within 120 days after you withdrew from the school. (The government sometimes extends this period under exceptional circumstances.)

You aren’t eligible for this kind of discharge in the following circumstances, even if the school closed.

  • You withdraw more than 120 days before the school closed.
  • You’re finishing a comparable program at another school through a teach-out agreement, by transferring the academic credits or hours that you earned at the closed school to another school, or in some other similar way. (A “teach-out agreement” is an agreement between the closed school and other schools to ensure that students from the closed school can finish their programs.)
  • You finished all program coursework at the closed school, even if you haven’t received a diploma or a certificate.

False Certification Discharge

If the school didn’t make sure you were qualified to attend the program—or you fall into any of the other categories described below—you might be able to discharge your federal student loans.

Typically, FFELs and Direct Loans can be discharged in the following situations:

The School Falsely Certified Your Ability to Benefit

The school falsely certified your ability to benefit from its training, and you didn’t meet the applicable admission requirements.

Your Status Disqualifies You From Employment In the Field You’re Studying

When you enrolled, you couldn't meet the licensing requirements for employment in the field for which you were to receive training because of a physical or mental condition, age, criminal record, or another reason. For example, suppose you had a felony record and enrolled in a security guard course, but your state doesn’t permit prior felons to work as security guards. You would likely be eligible for a discharge in this situation.

You Loan Is Based On Forgery

The school forged your signature on the loan papers, or the school endorsed your loan check or signed your authorization for an electronic funds transfer without your knowledge. But you're not eligible if you received the loan proceeds or they were applied to charges you owed to the school.

You’re a Victim of Identity Theft

You can get a discharge if you were a victim of the crime of identity theft, and someone unlawfully took out student loans in your name.

Unpaid Refund Discharge

You can generally discharge all or a portion of FFELs and Direct Loans if you never attended the school or withdrew from the school, but the school failed to refund the loan money. Also, some states have funds to reimburse students who didn’t get refunds due to them.

Borrower Defense to Repayment

You might qualify for loan forgiveness based on a borrower defense to repayment if you can prove that the school defrauded you.

For federal student loans made on or after July 1, 2020, the Education Department has announced a new federal standard for discharging loans based on a borrower defense to repayment. A borrower must meet all of the following criteria:

  • The institution at which the borrower enrolled made a misrepresentation of material fact upon which the borrower reasonably relied in deciding to obtain a Direct Loan or a loan repaid by a Direct Consolidation Loan.
  • The misrepresentation directly and clearly related to the borrower’s enrollment or continuing enrollment at the institution or the institution’s provision of education services for which the loan was made.
  • The misrepresentation financially harmed the borrower.

Under this new standard, the limitations period for all claims is three years from the date that the borrower leaves the school for any reason, like withdrawal or graduation.

Total and Permanent Disability Discharge

You can get a discharge of your federal student loans if you're disabled. To qualify for this kind of discharge, you must prove to the U.S. Department of Education that you’re totally and permanently disabled. But the U.S. Department of Education will discharge eligible disabled veterans’ debts automatically unless they opt out.

Public Service Loan Forgiveness

You might be eligible for forgiveness of your Direct Loans if you work in public service, like for a government agency or a nonprofit organization. To qualify for this kind of forgiveness, you must make 120 qualifying payments while employed full-time by a qualifying employer or employers. And you must make your payments through a qualifying repayment plan, which include all of the income-driven repayment plans. You also have to be working for a qualifying employer when you submit the application for forgiveness, and when your loan’s remaining balance is forgiven.

To ensure you’re on track to receive forgiveness under this program, you should complete and submit an Employment Certification form to the Department of Education annually, and whenever you change employers. Use this tool to assist you in completing the forms required for this program.

After you submit the form and if your employer qualifies, all of your loans held by the Department of Education may be transferred to FedLoan Servicing. Remember, you have to be in the right kind of repayment plan with the right type of loan to qualify for this type of forgiveness. You generally also have to end up at the right servicer: FedLoan, the servicer the federal government employs to administer the program.

Teacher Loan Forgiveness

If you teach full-time for five complete and consecutive academic years in a low-income school or educational service agency—and you meet other qualifications—you might qualify for forgiveness of up to $17,500. Direct subsidized and unsubsidized loans, as well as subsidized and unsubsidized Federal Stafford Loans, qualify.

Perkins Loan Cancellation and Discharge

Those who do certain kinds of public service, like a teacher in a school serving students from low-income families, or are employed in specific occupations, like as a volunteer in the Peace Corps or in the military, might qualify for a Perkins Loan cancellation. Depending on the type of loan you have, and when that loan was taken out, you might be eligible to cancel part or all of the loan.

Also, under the following conditions, your Perkins Loan may be discharged:

  • bankruptcy
  • death
  • school closure
  • service-connected disability (veterans)
  • spouse of a victim of the events of 9/11, and
  • total and permanent disability.

Death Discharge

Federal student loans can normally be discharged when a student or, in some cases, a parent dies.

What If the Student Dies?

Federal student loans—like Direct Loans, FFEL program loans, and Perkins Loans—can be discharged if the student dies.

When A Parent’s Death Can Discharge a PLUS Loan

With a parent PLUS loan, the loan may be discharged if the borrower (the parent) or the student dies. But if both parents signed for a PLUS loan, one’s death doesn’t wipe out the remaining debt.

Death Doesn’t Necessarily Wipe Out Consolidated Loans

If spouses have consolidated their federal student loans together, one spouse's death wipes out only that spouse's portion. In the past, spouses could consolidate their federal student loans. Now, though, married couples aren’t allowed to combine their student loans into a single, shared Direct Consolidation Loan.

Bankruptcy Discharge

Generally, borrowers have a tough time getting rid of student loan debt in a Chapter 7 or Chapter 13 bankruptcy, but if you can show that repaying your student loans would cause you an undue hardship, you can get a discharge. The test for determining undue hardship varies among courts. Also, many courts look at the undue hardship test as all or nothing—either your whole loan is discharged, or it isn't. Other courts have discharged a portion of a debtor’s student loan.

Regardless of the test used, most courts are hesitant to discharge student loans. But if you have very low income or your loan is from a for-profit trade school, you might have a better chance.

How to Get Student Loan Forgiveness

To apply for federal student loan forgiveness, cancellation, or discharge, contact your loan servicer. You can also download the forms here. If you have a Federal Perkins Loan, contact the school that made the loan or contact the loan servicer the school has designated. Again, discharges for totally and permanently disabled veterans are automatic unless the veteran opts out.

Your servicer can give you information about different options. But be aware that your servicer might not tell you about all the available forgiveness programs. For this reason, it pays to learn about your options before you call. Go to the Federal Student Aid website to get extensive information about each type of available program.

Making Sure You’re on Track for Forgiveness

If you’re planning on getting loan forgiveness, you need to make sure your loans qualify. You must have federal—not private—student loans. Also, for certain loan forgiveness programs, you must have specific kinds of federal student loans. For example, if you want to qualify for public service loan forgiveness, you must have Direct Loans.

Some programs, such as public service loan forgiveness, require you to make payments under a qualifying repayment plan. And, for certain programs, only payments you make while employed for a qualifying employer will count toward loan forgiveness. So, you need to become very familiar with program requirements and make sure you strictly adhere to them. And, keep an eye out for changes in loan forgiveness programs because eligibility criteria and requirements could change.

Getting Help

If you have questions about your loans, forgiveness programs, and how to apply for them, contact your servicer. You can also get detailed information about federal student loans, forgiveness programs, and other ways to manage your student loan debt on the U.S. Department of Education’s Federal Student Aid website. To learn about different options if you’re struggling to pay your student loans, see How to Get Out of Student Loan Debt.

If you need assistance in dealing with your servicer or need help understanding the different repayment, deferment, forbearance, and forgiveness options for federal student loans, consider consulting with a student loan attorney or debt negotiation attorney who deals with student loans.

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