Student Loan Forgiveness

Image of documents labeled PUBLIC SERVICE LOAN FORGIVENESS

There are a number of scenarios that can result in the cancellation, discharge, or forgiveness of a federal student loan. It's important that you know ahead of time the triggering events that can cause your loan to be affected in these ways.

Which Scenarios Qualify for Student Loan Forgiveness, Cancellation, or Discharge?

All Direct, FFEL and Perkins Loans accept at least some types of forgiveness, cancellation, or discharge scenarios.

Total and Permanent Disability (TPD) Discharge

Loans that include this option: Direct, Federal and Perkins loans

A total and permanent disability discharge of your loan would relieve you entirely of your obligation to repay. This would occur if you were to become totally and permanently disabled. In order to receive this type of discharge, it would be necessary to prove that you are, in fact, disabled to the required degree. There are three ways you can prove your disabled status:

  • If you're a veteran, documentation from the U.S. Department of Veterans Affairs (VA) indicating that you are disabled as a result of service, and are therefore unemployable.
  • If you are currently receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you can submit a Social Security Administration notice indicating that this is the case. The notice should state that your next disability review will take place within 5 to 7 years from the most recent review.
  • If you're not a veteran and aren't receiving SSI or SSDI, you can submit a physician's certification stating that you are totally and permanently disabled. This certification must show that you have been medically determined to have a physical or mental impairment that is expected to lead to death, has lasted at least 60 months continuously, or can be expected to last for at least 60 months continuously.

For more information about the Total and Permanent Disability Discharge, visit www.disabilitydischarge.com.

Death Discharge

Loans that include this option: Direct Loans and FFEL Program Loans

In the unfortunate case of the death of the borrower, the entirety of the loan will be discharged. If you are a parent of a student and you took out a PLUS loan, the entirety of your loan will be cancelled should either you or your student pass away.

Please note that the loan will be discharged only if a family member or representative of the deceased provides the school (for a Perkins Loan) or the loan servicers (for a Direct or FFEL Program Loan) with a death certificate.

Discharge in Bankruptcy

Loans that allow this option: Direct, FFEL Program, Perkins loans

Although it's not easy, student loans can be discharged in bankruptcy. This will only happen, however, if the bankruptcy court has found that the repayment of your loan would create a financial hardship for you and your dependents. The decision on your discharge will be made in court, and your creditors will be allowed to be present to challenge your situation.

The court employs a three-part test to determine the severity of your hardship.

Part 1: You would be unable to maintain the minimum standard of living if you were required to make your loan payments.

Part 2: There is evidence that the hardship would be continuous for a significant amount of time during the repayment period.

Part 3: A substantial effort was made by you to repay the loan prior to filing for bankruptcy.

Closed School Discharge

Loans that allow this option: Direct and FFEL Program loans

Your Direct and FFEL Program loans may be discharged if one of the following occurs:

  • The school you're attending closes while you are enrolled and, as a result, you are unable to complete your chosen program of study.
  • You withdraw, and the school closes within the next 90 days.

To apply for a closed school discharge, you must fill out an application from your loan servicer.

False Certification of Student Eligibility or Unauthorized Payment Discharge

Loans that allow this option: Direct and FFEL Program loan

You might be eligible for 100% loan discharge if one or more of the following occurred:

    You were a victim of identity theft and have a loan that was falsely certified. The school you were/are attending signed the application and/or promissory note in your name without your authorization. The school you were/are attending endorsed your loan check without your authorization. You eligibility to receive the loan was falsely certified because the school you were/are attending believed you would benefit from the training you would receive. The school certified your loan eligibility but, due to physical, mental, age, criminal or other restrictions, you are disqualified from employment in your field of study.

Unpaid Refund Discharge

Loans that allow this option: Direct and FFEL Program loans

If you withdrew from the school you were attending, and your Direct or FFEL Program loan wasn't refunded by the school to either the U.S. Department of Education or to the lender, you may be eligible for a discharge of your loan. Please note that the only amount that will be discharged is the amount that was unpaid by the school. Your loan servicer will have more information if this situation applies to you.

Teacher Loan Forgiveness

Loans that allow this option: Direct and FFEL Program loans

You may be eligible to have as much as $17,500 of your subsidized or unsubsidized Direct or FFEL Program loans forgiven. In order to be eligible, you must:

    Be a new borrower with no outstanding balance on a Direct or FFEL Program loan as of October 1, 1998, OR on the date you obtained a Direct or FFEL Program loan after October 1, 1998.) Be a full-time teacher in a low-income elementary or secondary school, or educational service agency. Be a teacher in that school or agency for five consecutive years.

Please note that PLUS loans aren't eligible for this option.

Perkins Loan Cancellation and Discharge

Loans that allow this option: Perkins loans

Participating in any of the following service positions could qualify you to have some, or all, of your loan cancelled, depending on when you received it:

  • Service in the U.S. armed forces in a hostile fire or imminent danger pay area
    • Up to 50% forgiven for borrowers whose active duty service ended before Aug. 14, 2008.
    • Up to 100% forgiven for borrowers whose active duty service includes or began on or after Aug. 14, 2008.
  • Full-time firefighter (for service that includes August 14, 2008, or began on or after that date) - Up to 100% forgiven
  • Full-time law enforcement or corrections officer - Up to 100% forgiven
  • Full-time nurse or medical technician - Up to 100% forgiven
  • VISTA or Peace Corps volunteer - Up to 70% forgiven
  • Librarian with a master's degree working in a Title I-eligible elementary or secondary school or in a public library serving Title I-eligible schools (for service that includes August 14, 2008, or began on or after that date) - Up to 100% forgiven
  • Full-time attorney employed in a federal public or community defender organization (for service that includes August 14, 2008, or began on or after that date) - Up to 100% forgiven
  • Full-time employee of a public or nonprofit child or family-services agency, providing services to high-risk children and their families from low-income communities. - Up to 100% forgiven
  • Full-time staff member in the education component of a Head Start program. - Up to 100% forgiven
  • Full-time staff member in a pre-kindergarten or child care program that is licensed or regulated by a state (for service that includes August 14, 2008, or began on or after that date. - Up to 100% forgiven
  • Full-time qualified professional provider of early intervention services for the disabled. - Up to 100% forgiven
  • Full-time speech pathologist with a master's degree working in a Title I-eligible elementary or secondary school (for service that includes August 14, 2008, or began on or after that date) - Up to 100% forgiven
  • Full-time special education teacher of children with disabilities in a public or other nonprofit elementary or secondary school. - Up to 100% forgiven
  • Full-time teacher of math, science, foreign languages, bilingual education, or other fields designated as teacher shortage areas. - Up to 100% forgiven
  • Full-time special education teacher of children with disabilities in an educational service agency (for service that includes August 14, 2008, or began on or after that date) - Up to 100% forgiven
  • Full-time teacher in a designated educational service agency serving students from low-income families (for teaching service that includes August 14, 2008, or began on or after that date) - Up to 100% forgiven
  • Full-time faculty member at a tribal college or university (for service that includes August 14, 2008, or began on or after that date) - Up to 100% forgiven

Public Service Loan Forgiveness

Loans that allow this option: Direct loans made after Oct 1, 2007

The PSLF Program was created to give incentive to individuals to find full-time, long-term work in public service jobs. If an individual works in a certain public service job and has made 120 qualifying monthly payments on their Direct Loan, they may qualify for forgiveness of the remaining amount on their loan.

The full-time positions that qualify include any federal, state or local government agency, entity, or organization. Also qualifying would be a full-time position with a non-profit that has been designated as tax-exempt by the IRS under Section 501(c)(3) of the Internal Revenue Code. The types of employment or services performed within the organization do not matter in order to receive a PSLF. They do, however, matter if the non-profit is a private entity, but is NOT tax-exempt organization under Section 501(c)(3). In this case, the services must include one of the following:

  • Emergency management
  • Military services
  • School library or other school services
  • Public interest law services
  • Early childhood education
  • Public service for the elderly and individuals with disabilities