A student loan discharge could eliminate any student loan balances you owe to lenders once you’ve met certain requirements for cancellation of your debt.
In special circumstances, individuals with federal student loans can have their debts erased completely, but only by meeting one of several requirements for discharge.
Unlike forgiveness, where loans are cancelled for qualifying professions or public service, a discharge is typically offered when a borrower is unable to repay their debts due to extenuating circumstances.
Types of Student Loan Discharge Options
There are a few ways your federal student loans could become eligible for a discharge. Here are a few ways you can qualify after meeting the associated conditions.
Closed School Discharge
If you took out federal student loans and the school you attended or were enrolled at was closed, you may be eligible for a discharge. However, you must have been enrolled in the school within 120 days of the school closing.
Even if you were approved for a leave of absence during the 120-day period, you could still be eligible for a discharge of your federal student debt. The important thing is to have academic and financial records proving your enrollment during this period.
If you’re unable to do this directly through the school because it’s now closed, your state’s licensing agency may be able to help.
Perkins Loan Cancellation or Discharge
Some professions qualify for a discharge of student loans under qualifying circumstances. These include:
- Volunteers in the Peace Corps or ACTION program (including VISTA)
- U. S. Armed Forces Members
- Nurses or Medical Technicians
- Police Officers and Firefighters
- Head Start Workers
- Child or Family Services Workers
- Professional Providers of Early Intervention Services
For each year of service in a qualifying profession, a percentage of your loans could be forgiven, depending on the type of service performed.
To learn if you qualify for a Perkins Loan Cancellation or Discharge, contact one of our student loan experts at (800) 670-4196.
Total and Permanent Disability Discharge
If you become totally and permanently disabled due to service in the Armed Forces or through an accident or illness, you may qualify for a Total and Permanent Disability (TPD) Discharge.
As part of the requirements, you will need to prove that you are unable to hold gainful employment, and thereby unable to pay back your student loans as a result.
Explore the complete requirements for a TPD Discharge or find out if you qualify for free.
Discharge Due to Death
In the unfortunate event that a borrower with student debt passes away, any remaining balances can be discharged by sending a death certificate and/or other documentation required for discharge to the loan servicer.
Discharge due to death can also be obtained by the parents of a deceased family member, meaning Parent PLUS Loans also qualify for this benefit.
Discharge in Bankruptcy
According to section 11 USC 523(a)(8) of the U.S. Bankruptcy Code, borrowers who have filed for Chapter 7 or Chapter 13 bankruptcy can have student loans discharged if the debt would “impose an undue hardship on the debtor and the debtor’s dependents”.
In rare cases, you could be approved for a student loan discharge in bankruptcy if:
- Loan repayment wouldn’t allow you to maintain a minimum standard of living
- Your hardship is expected to continue for a significant portion of the repayment period
- You have made every effort to repay your student loans before filing for bankruptcy
However, depending on a few factors, you may not have your entire student loan balance discharged as a result of bankruptcy. This means you could still be required to repay a certain amount of your student loans, or you could have your repayment agreement modified under different payment terms or interest rates.
If you’re unable to get approved for a discharge in bankruptcy, you can also look at other income-driven repayment options that can help reduce your monthly payments considerably. These include:
- Income-Based Repayment (IBR) Plan
- Income-Contingent Repayment (ICR) Plan
- Pay As You Earn (PAYE) Plan
- Revised Pay As You Earn (REPAYE) Plan
False Certification of Student Eligibility or Unauthorized Payment Discharge
Under the following circumstances, your Direct Loans or FFEL Program Loans could make you eligible for a discharge of your student debt:
- Your school falsely certified you as eligible for student loans even though you didn’t meet eligibility requirements
- Your name was signed on an application or promissory note by the school without your authorization
- Without your knowledge, your school endorsed your loan check or signed your authorization for a transfer of electronic funds
- You were a victim of identity theft which resulted in a falsely certified loan
- Your school certified you for loan eligibility but you are disqualified from employment in the occupation you’re being trained for due to physical or mental condition, age, criminal record or another reason
If you meet any of the above requirements, or you think you may be eligible, you’ll need to contact your loan servicer for information on proving eligibility for this type of student loan discharge.
Unpaid Refund Discharge
If you withdrew from school without using the entire balance of your Direct Loans or FFEL Program loans, you could be eligible for an unpaid refund discharge. This means your school didn’t pay a refund of the remaining balance to the U.S. Department of Education or another lender, regardless of whether or not the school is currently open.
Borrower Defense Discharge
You could also qualify for a student loan discharge if your college violated state laws while you were enrolled. To take advantage of this type of discharge, you will need to prove the school used illegal or misleading tactics to get you to secure student loans and attend the school.
Once you’ve made a request for a borrower defense discharge, your loans will be put into forbearance and collections will stop. If you’re approved for a discharge, your debt will be eliminated. However, if you’re unable to get approved, you will have to begin repaying the student loans, along with the interest that has accrued during forbearance.
For more details on student loan discharge options, speak with an expert by phone at (800) 670-4196.
STUDENT LOAN FORGIVENESS Student loan repayment has undergone tremendous reform over the past few decades. As part of these federal student debt relief initiatives, new options have become available to…
STUDENT LOAN FORGIVENESS Student loan repayment has undergone tremendous reform over the past few decades. As part of these federal student debt relief initiatives, new options have become available to those looking to benefit from today’s student loan forgiveness programs.Learn More