Student Loan Relief: Canceling Your Loans

If your federal student loans are discharged, you don't have to repay the debt.

If you’re eligible, you can eliminate your federal student loans through a loan cancellation program. To qualify for a particular program, you'll have to meet specific criteria, take certain steps, and meet particular conditions.

Here's a summary of different cancellation options that are available to borrowers.

School Closure 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 in order 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 cancel a FFEL Program Loan, 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 cancellation 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 make sure 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.

Automatic Closed School Discharges

In December 2018, the Department of Education announced that if you meet the eligibility requirements for a closed school discharge for loans you took out to attend a school that closed on or after November 1, 2013—like a Corinthian College—and you haven't enrolled at another school that participates in the federal student aid programs within three years of the school's closure date, you'll receive an automatic discharge. The Department of Education will initiate the discharge, and your loan servicer will notify you about it.

If you don't want to wait for the three years to expire before you get an automatic discharge, you may apply for a closed school discharge as soon as the Department of Education confirms your school’s official closure date. So, if you attended a school that closed less than three years ago, meet the eligibility requirements for a closed school discharge, and want your loans forgiven sooner, contact your loan servicer about applying for a discharge.

Also, if you don't receive an automatic closed school discharge, but you otherwise meet the eligibility requirements for a closed school discharge, you may apply for one. Contact your servicer to learn how to submit an application.

False Certification

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 cancel your federal student loans.

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

  • Ability to benefit. The school falsely certified your ability to benefit from its training, and you didn’t meet the applicable admission requirements.
  • Status. At the time 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.
  • 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.)
  • Identity theft. You were a victim of the crime of identity theft and someone unlawfully took out student loans in your name.

Unpaid Refunds

You can generally cancel all or a portion of FFEL Program Loans and Direct Loans if you never attended the school or withdrew from the school, but the school failed to refund the loan money. In addition, some states have funds to reimburse students who didn’t get refunds due 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 Department of Education 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 borrower was financially harmed by the misrepresentation.

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.

Permanent Disability

You can cancel federal student loans if you're totally and permanently disabled.

Public Service Loan Forgiveness

You might be able to cancel 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 (plans that base your monthly payment on your income). You also have to be working for a qualifying employer when you submit the application for forgiveness and when the remaining balance on your loan is forgiven.

If you're planning on applying for this kind of discharge, you should complete and submit an Employment Certification form to the Department of Education annually and whenever you change employers to make sure you’re on track to receive forgiveness. 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 kind of loan in order 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.

According to the U.S. Department of Education, more than 99% of people who applied for public service loan forgiveness have been rejected. As of December 31, 2018, approximately 58,000 applications have been processed. Of that total, over 73% were denied due to borrowers not meeting the program requirements, for reasons like not having eligible student loans, failing to make 120 qualifying payments, or not working for a qualified employer. More than 25% of applications were denied because of missing or incomplete information on the Employment Certification form.

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 on your Direct subsidized and unsubsidized loans and your subsidized and unsubsidized Federal Stafford Loans.

Perkins Loan Cancellation and Discharge

Those who do certain kinds of public service 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 may be eligible to cancel part or all the loan.

Death

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

A student’s death wipes out outstanding amounts owed on federal student loans. Federal student loans—like Direct Loans, FFEL program loans, and Perkins Loans—can be canceled if the student dies.

A parent’s death can wipe out 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, the death of one does not 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 individual student loans into in a single, shared Direct Consolidation Loan.)

Bankruptcy

Most borrowers won’t be able to get 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.

Learn More

To apply to cancel your student loans—or to find out more about whether you qualify—call your loan servicer or you may download the forms here. If you have a Federal Perkins Loan, contact the school that made the loan or contact the servicer the school has designated.

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 U.S. Department of Education’s Federal Student Aid website to get extensive information about each type of available discharge.

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