Cancellation, Discharge, and Forgiveness of Federal Student Loans

Reviewed: August 01, 2016
By FinanceWeb

You are required to repay your Federal student loan, even if you did not complete your education. Not being able to find a job in your chosen field or being dissatisfied with the education received are not excuses for avoiding repayment. However, there are situations that will allow you to apply to have your loan discharged, forgiven or cancelled. If you think you qualify, contact your loan service provider. For Federal Perkins Loans, you must check with the school that gave you the loan. To learn specifics about your loan, including what type of loan and who the servicer is, log into My Federal Student Aid.

Disability

Certain Federal student loans, such as a Perkins loan, may be discharged if you can demonstrate that you are permanently and totally disabled. A veteran can submit documentation from the Department of Veterans Affairs. For non-veterans, a notice of receipt of Social Security Disability Insurance or Supplemental Security Income from the Social Security Administration or written certification from a doctor qualifies as acceptable documentation.

Death

Federal student loans are discharged on the death of the borrower.

Bankruptcy

There is the possibility of discharge in a bankruptcy situation. You must demonstrate to the court undue hardship would be caused by requiring you to repay your student loan, such as not being able to provide for yourself or your dependents in a manner that would meet a minimal standard of living.

False Certification of Eligibility

Some Federal student loans may qualify for discharge if they were obtained under false circumstances. These would include being determined eligible for a program when you really weren’t, simply so that the school could collect payments from you. Other examples of false certification include the school signing your name to an application, or endorsing a check, without your authorization. Victims of identity theft may also apply to have loans discharged.

Unpaid Refund Discharge

If you withdraw from a school, the school is required to send a refund to either the lender or the U.S. Department of Education. If the school fails to do this, you may apply for a discharge of the unpaid refund.

Teacher Loan Forgiveness

Under certain circumstances, such as being a teacher full-time in an education service agency or a low-income school district, may qualify you for a partial discharge of an FFEL Program or Direct Loan.

Public Service Loan Forgiveness

Once you have made 120 payments on your Direct Loan, and you have worked in a qualifying public sector job, you may apply to have the balance of your loan forgiven.

Perkins Loan Cancellation and Discharge

Depending on the job, a percentage of a Perkins loan may be cancelled for each year worked. The total that qualifies for cancellation will depend on the job. Some examples of acceptable positions include teacher, member of the armed services, medical technician or nurse, corrections or law enforcement officer and Head Start worker.