Student loans are notoriously difficult to get out of — it’s one of the few types of debt that isn’t guaranteed to go away with bankruptcy. But there are a few situations where the government or your lender can discharge your student loans.
Generally, it’s under extreme circumstances like identity theft or death. And you might have to pay taxes on the discharged portion.
How does student loan discharge work?
Student loan discharge works by canceling your student loans so you no longer need to make repayments. It’s more common with federal loans than private student loans — though it’s generally not common at all.
To get your student loans discharged, you typically need to fill out an application and have your lender or a government agency approve it. While you’re waiting for approval, you still need to continue paying off your student loans as you normally would.
Once approved, you no longer have to make repayments. However, the IRS typically considers the amount you’re forgiven taxable income, so you’ll likely have to include it in your tax return for that year.
7 ways to get your federal student loans discharged
Have federal student loans? Look into these seven types of discharge to see if you might qualify:
1. Closed school discharge
Qualifying loans: Direct Loans, FFEL Loans, Perkins Loans
Am I eligible for closed school discharge?
You must have been one of the following when your school closed:
On an approved leave of absence
Withdrawn from the school within 120 days of its closing
You aren’t eligible if you’re completing the degree with a similar program from another school.
How closed school discharge works
If your school shut down while you were enrolled or recently after you left the program, you can apply to have the US Department of Education (DoE) discharge the balance of the federal loans you took out to pay for that program.
Think you qualify? Reach out to your servicer to get started on the application process. Your student loans might also automatically be discharged under the following circumstances:
Your school closed on or after November 1, 2013.
You haven’t enrolled in another school that offers federal student aid within three years of the school closing.
You meet the other eligibility requirements for closed school discharge.
Automatic closed school discharge kicks in three years after your school closes — at that point, the DoE notifies your servicer to get the process started. However, you can also apply for standard closed school discharge if you don’t want to wait that long.
Someone stole your identity and took out a federal loan in your name.
Your school forged your signature on federal loan documents.
You were eligible for a federal loan, but couldn’t meet state requirements for the career you were being trained for.
If you qualify, the Department of Education might forgive the student loans mistakenly or fraudulently taken out in your name. Contact your servicer if you think you might be eligible for this type of discharge.
3. Unpaid refund discharge
Qualifying loans: Direct Loans, FFEL Loans
Can I qualify for unpaid refund discharge?
You might be eligible to have part of your student loans forgiven if you withdrew from school before completing your program while you still had loans.
Schools typically have their own procedures for unpaid refund discharge. If you believe you might be eligible, reach out to your school’s financial aid department and your loan servicer to find out if you qualify and what steps you need to take.
4. Borrower defense discharge
Qualifying loans: Direct Loans, FFEL Loans, Perkins Loans
Can I qualify for borrower defense discharge?
You might be able to qualify to have part or all of your federal loans discharged if your school broke state laws when it issued your loan or misled you about the educational services it offered. You can’t qualify for other legal violations such as personal injury or harassment.
How borrower defense discharge works
Most borrowers can apply for borrower defense discharge by filling out an application on the Federal Student Aid website or downloading and mailing in the form. Along with your application, include as many of the following documents as possible:
Your school’s promotional materials
Emails between you and school officials
Your school’s course catalog
After submitting your application, wait for your servicer to reach out with further instructions.
In the application, you have the option of going into forbearance or having collections stopped on any defaulted loans. This means you can avoid paying off your loans while your application is being processed. However, you’ll have to pay any interest that accumulates during forbearance if your application is denied.
5. Bankruptcy discharge
Qualifying loans: All federal student loans
Am I eligible for bankruptcy discharge?
You might qualify for bankruptcy discharge if you file for Chapter 7 or Chapter 13 bankruptcy and a judge rules that paying off your student loans would cause undue hardship. Currently, the government considers your loans an undue hardship if:
Paying them off would mean you couldn’t meet a minimal standard of living.
Your hardship would continue for a large portion of your remaining loan term.
You’ve made an earnest effort to pay off your loans before you filed for bankruptcy.
If a judge rules in your favor, you could either have your loans entirely forgiven, partially forgiven or get an adjusted repayment plan with potentially lower rates.
Qualifying loans: Direct Loans, FFEL Loans, Perkins Loans, TEACH Grant service obligations
Am I eligible for TPD discharge?
You could be eligible for total and permanent disability (TPD) discharge if you have a long-term disability that affects your ability to work. You need to submit documentation from one of these three organizations or individuals to qualify:
US Department of Veterans Affairs. Must state that you have a completely disabling service-related injury or are completely disabled based on the VA’s unemployability rating.
Social Security Administration. Must show that you’re eligible for Social Security Disability Insurance or Supplemental Security Income for the next five to seven years.
Your physician. Must certify that you’ve either been unable to work for the past five years or next five years due to your disability, or that your disability is terminal.
How to apply for TPD discharge
You can apply for TPD discharge by filling out an application and submitting it to Nelnet, the Department of Education’s TPD servicer. You can request an application over the phone by calling 888-303-7818 or by emailing firstname.lastname@example.org.
Once you reach out to Nelnet, your repayments will be put on hold for 120 days to give you time to complete and submit the application.
The three-year postdischarge period
After your loans are discharged, there is a three-year postdischarge period where you are required to submit documentation of your annual income to Nelnet to make sure you’re still eligible. During this time, you’ll have to pay off your student loans or fulfill your TEACH Grant requirements if you:
Earn more than the federal poverty guidelines for a family of two in your state from a job.
Take out another Direct Loan or get another TEACH Grant.
Didn’t return funds from another Direct Loan or Teach Grant that was disbursed after your discharge was approved within 120 days of approval.
Got a notice from the Social Security Administration saying you’re no longer disabled.
Got a notice from the Social Security Administration saying your next scheduled disability review is no longer in the next five to seven years.
7. Death discharge
Qualifying loans: All federal student loans
Who’s eligible for a death discharge?
Generally, the DoE discharges student loans if you or the loan holder dies after a family member presents a death certificate. These can be presented in an original copy, certified copy or high-quality photocopy.
What to watch out for with federal loan discharge
The benefits of getting your student loans discharged are clear: You no longer carry that debt and don’t have to worry about repayments anymore. But there are a a couple factors you might want to consider before you apply.
With the exception of death and TPD discharge, the IRS counts the discharged amount of student loans as income. This means it’ll count toward your gross income when you file taxes for that year and could potentially put you in a higher tax bracket.
Student loan discharge scams
Make sure the student loan discharge program you’re applying for is legit. You might have gotten phone calls advertising the Obama Loan Forgiveness Program or other fake student loan discharge programs. But often these are shams that could be attempts to steal money or your identity. Some student loan discharge scammers often:
Ask for your FSA ID. The FSA never asks for your ID or password over the phone. Giving it away could allow the scammer to make changes to your account.
Promise immediate discharge. Getting your student loans discharged never happens right away — you have to apply.
Tell you to act immediately. Scammers often try to pressure borrowers into giving personal information by saying a new law is about to discontinue the program.
Ask for upfront or monthly fees. The FSA charges zero fees to apply for student loan discharge.
The easiest way to make sure your program is legit? Check the Federal Student Aid website before you apply to make sure it’s listed.
Student loan discharge for private student loans
While federal student loan discharge is more common, some private student lenders might be willing to discharge your loans in extreme situations.
Many will cancel your loans in the event that you become disabled or the loan holder dies. Some might also cancel your loan if your cosigner dies. To find out what your options are, contact your student loan servicer.
Compare student loan refinancing offers
Can’t get your loans discharged? If you have good to excellent credit, consider refinancing your loans at a more favorable rate.
Can’t qualify for student loan discharge? Consider these forgiveness and assistance programs instead:
Public Service Loan Forgiveness. Borrowers who’ve worked at an eligible public service job while making 120 repayments on an income-driven repayment plan might be able to qualify to have their remaining student loans forgiven.
Teacher Loan Forgiveness. Teachers might be able to qualify to have up to $17,500 of their student loans forgiven after working in a low-income school for five years.
Perkins Loan Cancellation. Perkins Loan holders with public service jobs or volunteer positions — such as teachers, firefighters and nurses — can apply to have all or part of their Perkins Loans canceled.
Loan repayment assistance programs (LRAPs). Many states and government agencies have specific repayment programs for different types of professions that forgive part of your student loans. Anyone in law, healthcare, education or the military might want to take a close look at this option.
Generally, you can only get your student loans discharged in extreme circumstances. But if you’ve faced an unexpected obstacle — or shouldn’t have student loans in your name in the first place — then discharge could be an option. You can find out more about how it all works by reading our student loans guide.
Frequently asked questions
It depends on what types of loans you have and how you repay them. You can have your federal student loans forgiven after 25 years if you pay them back on an income-driven repayment plan. Otherwise, you’ll need to meet other qualifications to get them discharged.
You can if you meet other qualifications. For example, service-disabled veterans can qualify for TPD discharge.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
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