Introduction Paying For and Selecting a College Federal Loans, Private Loans, and How to Tell the Difference Repayment Plans Student Loan Servicers and Ombudsman Offices If You Can't Repay Your Loan Loan Consolidation Programs Loan Cancellation/Forgiveness Programs If Your Loan Defaults Collection Activities Additional Information and Assistance Glossary Index of Resources
Loan Cancellation/Forgiveness Programs
Under certain limited circumstances, you may be eligible to have all or part of your student loan forgiven or cancelled. If your loan is forgiven, you are no longer responsible for repayment. You can determine your eligibility by contacting your loan servicer.
Your federal loan may be cancelled for total and permanent disability that is established one of three ways:
- You have certification from a physician that you are unable to work and the condition has lasted or is expected to last for a continuous period of not less than 60 months;
- You are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits; or
- If you are a veteran, you may submit documentation from the U.S. Department of Veterans Affairs (VA) that shows that the VA has determined you are unemployable due to a service-connected disability.
If you work full-time in certain public service jobs and have made 120 payments on your Direct Loans (after Oct. 1, 2007), the remaining balance that you owe may be forgiven. Eligible jobs include employment by federal, state, local, or tribal government; nonprofit tax-exempt organizations; and full-time service in AmeriCorps or Peace Corps positions. Your loan must not be in default, and the 120 payments only count if they were made under certain repayment plans.
If you teach full-time for five consecutive years in a low-income elementary school, secondary school, or educational service agency, you may be able to have as much as $17,500 of your federal loan cancelled. Note that if you have a Perkins Loan, cancellation requirements may be different and if you have Direct PLUS loans only, you are not eligible for this type of forgiveness.
If you are enrolled in an income-based repayment plan, you may be eligible for loan forgiveness after consistent payments for 20 to 25 years, depending on the terms of the plan.
You may be eligible for discharge of your federal loans if your school closed while you were enrolled and you do not complete your program because of the closure or your school closes within 120 days after you withdrew.
If you believe your school committed fraud or that your school otherwise violated applicable state laws, all or part of your federal student loan may be eligible for forgiveness.
The U.S. Department of Education administers the borrower defense program. For more information on the borrower defense and how to apply for the program, go to the borrower defense to repayment website. If you have questions about borrower defense options, you may also call the federal government’s borrower defense hotline at (855) 279-6207 or send an email to FSAOperations@ed.gov.
Contact your lender or loan servicer as to whether cancellation or forgiveness is an option under your loans due to your circumstances. In general, most private student loans do not offer cancellation or loan forgiveness programs similar to federal student loans.
There is one exception to this, however. The federal Holder Rule was adopted by the Federal Trade Commission (FTC) to (in certain cases) provide options to consumers who otherwise would be legally obligated to make full payment to a creditor despite breach of warranty, misrepresentation, or even fraud on the part of the seller. Students who took out private student loans and believe their school made false representations to persuade them to take out those loans may wish to seek a remedy under the Holder Rule. The Federal Trade Commission has stated that student loans are within the scope of the Holder Rule.
If your loan is forgiven or cancelled, some or all of the forgiven loan amount may be considered taxable income. If this is a concern to you, you may wish to check with an accountant concerning the tax consequences of private loan forgiveness.