Options for Release
Even if you didn’t finish or are unhappy with your education, you must repay your student loans. However, there are some circumstances in which your federal student loans may be forgiven, canceled or discharged. Borrowers generally qualify for loan forgiveness as a result of their chosen career or are eligible for cancellation because of disability or fraud.
Loan forgiveness programs pay off or cancel all or part of the borrower’s federal student loans in exchange for service in particular public interest careers or volunteer work such as social workers or AmeriCorps volunteers. These programs aim to help borrowers stay in sometimes lower-paying public interest careers despite student loan debt. Unlike other types of debt cancellation (such as at the end of a repayment plan term), loan forgiveness is tax-free and isn’t treated as income for the year it’s forgiven.
Loan forgiveness programs are geared toward public service in specific occupations, including teachers, health professionals, lawyers, government employees, military service members and volunteer workers. Most programs will forgive up to 100% of the remaining loan. Unfortunately, no loan forgiveness programs currently exist for private loans.
Loan Discharge or Cancellation
Loan discharge or cancellation is possible in limited circumstances for certain federal loans and is the most complete relief you can receive. A successful cancellation removes the loan obligation, you receive reimbursement of some or all payments, and the discharge is reported to credit bureaus to delete any adverse credit history associated with the loan.
Your loan may be discharged or canceled for a variety of reasons. For federal student loan discharge, these may include the following:
- School closure: Your school closes while you’re enrolled or within 120 days after you withdraw.
- Unpaid refund: You didn’t receive a refund due to you.
- False certification: Your school didn’t make sure you met minimum requirements for your chosen occupation. For example, if you'd be disqualified from an occupation because of your criminal record prior to enrollment, then your school shouldn’t have admitted you into the program.
- Unauthorized signature: Your signature was forged on loan papers. To qualify, you mustn’t have received the loan money.
- False certification of ability to benefit: Your school didn’t properly evaluate your ability to benefit from coursework.
- Administrative forbearance: Your loan was falsely certified through identity theft.
- Total and permanent disability: You became completely and permanently disabled or died. Documentation or certification of permanent disability must be submitted to qualify. In the case of a Parent PLUS loan, the loan may be discharged if the student whom the loan was obtained for dies.
- Bankruptcy: In rare cases, student loans may be discharged through bankruptcy. You must prove that repayment would cause undue hardship.
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