Student loan forgiveness is referred to by many different names such as cancellation or discharge. Whatever term is used, student loan forgiveness is when a student borrower is no longer required to make payments; the loan is forgiven. And no matter what age the student was when they first signed the documents or how well they may have understood the requirements of the loan, it's typically quite difficult to have federal student loans canceled.
When forgiveness is in the cards, the road ahead is not always straightforward. There isn’t one office to contact or a simple form to fill out to apply. Instead, each discharge program comes with its own intricate instructions for application.
Eligibility for Student Loan Forgiveness
Is everyone eligible for student loan forgiveness? Unfortunately not. There are only some circumstances which lead to cancellation.
First and foremost, only federal student loans are eligible for discharge programs through the federal government. Private student loans are not eligible under any federal student loan forgiveness programs. On top of that, the chances of the obligation of a private student loan getting wiped clean is very low. In some cases, discharge under extreme circumstances such as death or disability might be possible, but the chances are still up in the air and dependent on the lender.
Secondly, the government sets strict requirements for student loan forgiveness, and it is hard to meet those. All in all, forgiveness is a tough option to take advantage of, and those who are drowning in debt need to look for other options like consolidation and refinancing.
Student Loan Forgiveness Programs and Opportunities
There are many options for federal student forgiveness in America. Each is unique in their application process and eligibility requirements. It’s not a bad idea to familiarize yourself with the various options to determine potential eligibility, either for immediate use or in the future.
Closed School Loan Discharge
If a school closes before a student has the chance to complete their degree, they may be eligible for full forgiveness of their loan. This applies to William D. Ford Federal Direct Loans and Federal Family Education Loans. It also applies if the student withdrew up to 120 days before closure. If the school closed more than 120 days after withdrawal, then the debt is still valid.
In some cases, the school may work out a deal with another institution to ensure students can complete their education. In this case, the loans are not eligible. The Closed School Discharge rule also doesn’t apply when a student has completed all their coursework and hasn’t received a degree. To apply to this program, students need to contact their specific loan servicer for more information.
Public Service Loan Discharge
In an effort to reward public service, the federal government developed the Public Service Loan Discharge. This discharge program applies to people who have made 120 consecutive loan payments (ten years) and work for qualified employers. The payments must have been made while working full-time. An eligible employer is any level of government from tribal to federal, non-profits which operate under Section 501(c)(3) of the Internal Revenue Code, and other non-profits that provide qualifying services.
This forgiveness program is only applicable to William D. Ford Federal Direct Loans. However, other direct federal loans could become relevant if they are consolidated. If interested, borrowers need to fill out the application form on an annual basis. If this form wasn’t completed, extensive documentation is required to prove completion of the program.
Teacher Loan Forgiveness
The Teacher Loan Forgiveness program offers cancellation of Direct Loans, Federal Stafford Loans, and Federal Perkins Loans. To qualify, teachers must have completed five consecutive, full years of employment at an eligible elementary or secondary school. If the criteria are met, up to $17,500 can be forgiven. To apply, teachers must complete an application and then submit it to their loan servicer.
Total and Permanent Disability Discharge
The total and permanent disability discharge is applicable for people who have suffered through an accident or illness that has left them completely disabled. This discharge applies to the following student loans:
- William D. Ford Federal Direct Loans
- Federal Family Education Loans
- Federal Perkins Loans
- TEACH Grants (service obligation is required)
The application process can be made online or through the mail. Full procedures are available on the Disability Discharge website.
Discharge Due to Death
If a borrower or the student for which the loan was acquired passes away, their student loans could be forgiven. In this case, the family or representative will need to provide the loan servicer with a certificate of death proving that the person died. In regards to a Parent PLUS loan, the discharge applies if the parent or the child passes away.
Discharge in Bankruptcy
If a borrower applies for bankruptcy under Chapter 7 or Chapter 13, they can also file a separate action requesting that their student loan payments qualify as an undue hardship. This action is called an adversary proceeding. The results are not as straightforward as other forgiveness programs and are ultimately up to the courts to decide how much, if any, of the debt is forgiven.
False Certification of Student Eligibility
One of the most complex cases for loan forgiveness is through the False Certification program. Under this program, which covers Direct and Federal Family Education Loans, borrowers qualify if they can prove their school falsified, forged, or otherwise manipulated the student loan without authorization. Other circumstances may include instances of identity theft. The application form can be found here.
Unpaid Refund Discharge
Another rare discharge program, the Unpaid Refund Discharge, applies when a student withdraws from school but the educational facility does not refund the money back to the Department of Education or lender. To apply, contact the loan servicer.
Borrower Defense Discharge
Finally, the Borrower Defense Program is for students whose school purposefully mislead them during the recruitment and application process. Specifically, they must have misrepresented the educational services offered. To apply, students need to collect all relevant information in regards to the misrepresentation and submit it to the Department of Education along with the application form. Because these cases can often be complex, it is recommended to contact some form of legal services for assistance.