student loan forgiveness relief programs can help resolve your student loan debt problems.
Your financial situation is different from someone else. The student loan forgiveness relief service that works for someone may not be the best choice for someone else. You should take the time to understand all the debt relief options available to you to find the best solution for your needs and goals.
Student Loan Forgiveness Guide Locator
What Is Student Loan Forgiveness Relief?
Student loan forgiveness is a process that eliminates a portion of your educational loan debt without penalties. This means you are no longer obligated to make your loan payments. The Federal government offers various student loan forgiveness programs, where you qualify based on your profession or government service. Each program has their specific requirements to be eligible for this benefit. Once you are eligible for one of these forgiveness programs, the servicer of your student loan discharges the balance that you owe on the loan. It is treated as your having paid off the loan balance as required. Depending on your circumstances, you may be required to pay taxes on the amount forgiven.
Why Student Loan Forgiveness?
The Federal government offers a variety of federal student loan forgiveness programs as a means of job recruitment and employee retention. This is to to encourage students to enter relatively low-paying careers like firefighting, teaching, government, nursing, public interest law and the military. Also, is an acknowledgement by the federal government that for many, the salary you earn after earning your degree does not match the educational expenses you incurred in the process. Given that so many adults are burdened with high student loan debt, the federal government forgiveness programs serve as an indirect form of educational subsidy.
You must repay your loans even if you don’t complete your education, cannot find a job related to your program of study, or are unhappy with the education you paid for with your loan. The list below is a quick view of the types of forgiveness, cancellation, and discharge available for the different types of federal student loans.
Public Service Loan Forgiveness
Teacher Loan Forgiveness
Forgiveness | Cancellation | Discharge
The terms forgiveness, cancellation, and discharge mean the same thing, but they are used in different ways. If you are no longer required to make payments on your school loans due to your job, this is generally called forgiveness or cancellation. If you are no longer required to make payments on your school loans due to other circumstances, such as a total and permanent disability or the closure of the school where you received your loans, this is generally called discharge.
If you have private student loans, there are no ways to get student loan forgiveness. The best bet is to consider refinancing your private student loan to lower your interest rate or change your payment terms to hopefully make your loan more affordable.
Remember, your student loan is technically an unsecured deb as no collateral was pledged to the lender to secure the loan. The only “guarantee of payment” you made to the lender was the promise of repayment from your future earnings. However, unlike other types of unsecured debt, like your credit cards or a personal loan, student loans (federal or private) are excluded, with very few exceptions, from being discharged in a personal bankruptcy judgement.
Federal Student Loan Repayment
Disability Discharge Loan Forgiveness
The Standard Repayment Plan is the most popular plan for federal student and parent loans. It is a level payment plan, with up to 120 fixed monthly payments during a repayment term of up to 10 years.
An Income Derived Repayment (IDR) plan for federal student loans is different. Instead of setting monthly payments according to your student loan balance, the amount due is relative to your income. It is intended to make your payments affordable while taking income and family size into account.
The term of IDR student loans is 20 – 25 years, rather than the Standard Repayment Plan of 10 years. When combined with one of the various student loan forgiveness plans, you have the potential to have the remainder of the IDR loan forgiven after 10 years. This is a significant reduction in your student debt, regardless of whether you are obligated to pay taxes on the debt forgiven.
It is possible to have your student loans discharged through bankruptcy. However it is very rare. The Federal government has enacted legislation to specifically prevent this from occurring in a bankruptcy proceeding. This process requires proving “undue hardship” and will likely require hiring a local bankruptcy attorney.
If you can prove “undue hardship”, the court has several options. In most cases, the proceedings will result in one of the following:
- Your loans are fully discharged, and you no longer have to make any payments.
- Your loans are partially discharged and you must repay a portion of the loan.
- Your loan takes on new terms like a lower interest rate or a longer repayment term. You must still repay your loan.
Both federal and private student loans can be challenged for a bankruptcy discharge.
To discharge your student loans through bankruptcy, you must prove that paying back your loans would be an undue hardship.
Many courts will use the Brunner Test to determine whether you meet the burden of proof for undue hardship. Other courts use the totality of the circumstances test. In this case the court will look at all relevant factors in your case to determine if it is an undue hardship for you to repay your student loan.
To pass this test, you need to meet the following three criteria:
- Poverty. Based upon your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loan.
- Persistence. Your current financial situation is likely to continue for a significant part of the repayment period.
- Good faith. You have made a good faith effort to repay your student loan
The best way to find out how courts in your jurisdiction define “undue hardship” is to speak with a local bankruptcy attorney.
How To Apply
Since bankruptcy does not typically include student loan debt, you will then need to file a bankruptcy adversary proceeding. This proceeding asks the court to determine whether student loan repayment would cause undue hardship. You’ll need to present evidence and prove to the court that payment of your loans will cause an undue hardship. It is likely that you ill need to retain an expert to testify about your ability to be gainfully employed in the future.
Be aware that these proceedings take a while and can get expensive. You should consider all other student loan debt relief options prior to consider bankruptcy discharge.
Closed School Discharge
This student loan forgiveness program program relieves students of their federal student debt if they are unable to attain their degree because their college or university closed down.
You will no longer have to make payments on eligible federal student loans and any payments you already made will be refunded. If you were in default on any of these loans, the loan holder will also repair your damaged credit history.
If your school closes while you are enrolled or within 120 days after you withdrew, you may be eligible for complete federal student loan discharge. The physical campus that you are enrolled in must be the one to close. For online schools, the college’s physical headquarters must have closed.
You may be eligible for a 100 percent discharge of your federal student loan if you were unable to complete your program because your school closed and if:
- You were enrolled when your school closed.
- You were on an approved leave of absence when your school closed.
- Your school closed within 120 days after you withdrew.
You are not eligible for discharge of your loans if your school closes and any of the following is true:
- You withdrew more than 120 days before the school closed.
- You are completing a comparable educational program at another school. Teach-Out | Transfer | Comparable Means
- You completed all the coursework for the program before the school closed, even if you did not receive a diploma or certificate.
If you have private student loans you will still be responsible for repaying them. Some states may have programs that assist students with private student loans in the event of a school closure. Also, some private student lenders may offer options to assist certain borrowers in this situation.
- William D. Ford Federal Direct Loan (Direct Loan) Program loans
- Federal Family Education Loan (FFEL) Program loans.
- Federal Perkins Loans
You will need to continue making payment until your school loan servicer informs you in writing that you do not have to issue them anymore.
As you will not be approved for a discharge until you’ve received the official paperwork, any payments you miss after applying (but before receiving approval) could lead to financial problems.
Fed Student Loan Forgiveness Summary
Type of Forgiveness, Cancellation, or Discharge
Federal Family Education Loan (FFEL) Program Loans
|Public Service Loan Forgiveness||X||X||X|
|Teacher Loan Forgiveness||X||X|
|Perkins Loan Cancellation (includes Teacher Cancellation)||X|
|Total and Permanent Disability Discharge||X||X||X|
|Bankruptcy Discharge (in rare cases)||X||X||X|
|Closed School Discharge||X||X||X|
|False Certification of Student Eligibility or Unauthorized Signature/Unauthorized Payment Discharge||X||X|
|Unpaid Refund Discharge||X||X|
*FFEL Program loans and Perkins Loans may become eligible for Public Service Loan Forgiveness if they are consolidated into the Direct Loan Program.
Explore All Options
Depending on where you live and work, you could qualify for partial or total forgiveness of your student loans. If you aren’t eligible, look into other debt relief options for dealing with your student loans.
Even if you started out on a certain Federal student loan plan, you don’t have to stick with it forever. Instead, feel free to adjust your plan as your circumstances and goals change over the years.
When in doubt, contact your student loan servicer to move forward with your life.