How to Cancel a Student Loan: Forgiveness & Discharge

Student loan cancellation, forgiveness, and discharge offer specific pathways to eliminate the obligation of repaying student loan debt. These are not automatic processes but involve formal applications and strict eligibility criteria. Understanding these distinct avenues is important for borrowers seeking relief. Program availability depends on factors like loan type, employment, disability status, or circumstances related to the educational institution.

Understanding Loan Cancellation Options

Numerous federal programs offer opportunities for student loan cancellation, forgiveness, or discharge, each with unique requirements.

Public Service Loan Forgiveness (PSLF)

PSLF is for individuals working full-time in public service. Borrowers must be employed by a U.S. federal, state, local, or tribal government organization, or a qualifying not-for-profit organization, including military service. PSLF requires 120 qualifying monthly payments made under a qualifying repayment plan, typically an income-driven repayment (IDR) plan, on Direct Loans. Payments do not need to be consecutive.

Teacher Loan Forgiveness (TLF)

TLF offers forgiveness for teachers who work in low-income schools or educational service agencies. To qualify, a teacher must be highly qualified and employed full-time for five complete and consecutive academic years in an eligible school. The maximum forgiveness is $17,500 for highly qualified mathematics, science, or special education teachers at the secondary level, while other qualifying teachers may receive up to $5,000. The loans must have been made before the end of the five years of qualifying service.

Total and Permanent Disability (TPD) Discharge

TPD Discharge is available for borrowers who cannot engage in substantial gainful activity due to a physical or mental impairment. Eligibility can be demonstrated through documentation from the U.S. Department of Veterans Affairs (VA) for 100% disabled veterans, the Social Security Administration (SSA) for those receiving disability benefits, or a licensed medical professional’s certification. For non-veteran applicants, a post-discharge monitoring period may apply, during which new loans or earnings above a certain threshold could lead to reinstatement of the discharged debt. As of July 1, 2023, this monitoring period no longer includes income monitoring.

Borrower Defense to Repayment

Borrower Defense to Repayment provides discharge for federal Direct Loans if a school engaged in misconduct, such as misrepresentation or fraud, related to its educational services or the loans. This includes instances where a school made false promises about job placement rates or violated state laws. The U.S. Department of Education reviews these claims. If approved, the remaining balance on applicable federal Direct Loans may be discharged, with potential refunds for past payments.

Closed School Discharge

Closed School Discharge is an option for borrowers whose school closed while they were enrolled, on an approved leave of absence, or within a specific timeframe (typically 120-180 days) after withdrawing. To qualify, borrowers must not have completed their program or transferred credits to a comparable program at another school. Federal student loans, including Direct Loans and PLUS loans, are eligible for this discharge.

Death Discharge

Death Discharge applies to federal student loans upon the death of the borrower. Federal student loans are discharged, and the borrower’s family is not responsible for repayment. Parent PLUS loans are also discharged if the parent borrower or the student on whose behalf the loan was taken out dies. Private student loans may or may not be discharged upon death, depending on the specific lender’s policy.

Bankruptcy Discharge

Bankruptcy Discharge for student loans is exceptionally rare and difficult to obtain. Borrowers must file a separate action within the bankruptcy proceeding, known as an “adversary proceeding,” and demonstrate to the court that repaying the loan would cause “undue hardship.” Courts typically consider factors such as an inability to maintain a minimal standard of living, the likelihood of this hardship continuing, and good-faith efforts to repay the loan.

Taxability of Forgiveness

Many types of federal student loan forgiveness, such as PSLF, Teacher Loan Forgiveness, and TPD discharge, are currently not considered taxable income at the federal level. The American Rescue Plan Act of 2021 made most federal student loan forgiveness tax-free through December 31, 2025. After this period, some types of forgiveness, like the remaining balance after income-driven repayment plans, may become taxable unless Congress extends the exclusion. State tax laws vary, and some states may still consider forgiven amounts taxable income.

Preparing Your Application

Before initiating any application for student loan cancellation or discharge, identify your specific loan servicer. This company handles the billing and day-to-day management of your student loan account. For federal student loans, the U.S. Department of Education assigns a servicer, which can be found by logging into your account dashboard on StudentAid.gov or by contacting the Federal Student Aid Information Center (FSAIC). For private loans, review your loan documents, billing statements, or credit report to identify the servicer.

Confirming your loan type is equally important, as eligibility often depends on whether loans are federal or private. Most federal loan cancellation programs only apply to federal loans, particularly Direct Loans. If you have Federal Family Education Loan (FFEL) Program loans or Federal Perkins Loans, they may need to be consolidated into a Direct Consolidation Loan to become eligible for certain programs like PSLF. Private loans typically do not qualify for federal forgiveness or discharge programs.

Gathering necessary documentation ensures your application is complete and accurate. Common types of information and documentation include:

Proof of employment for PSLF or Teacher Loan Forgiveness, such as employment certification forms signed by your employer.
Medical documentation from a physician or verification from the VA or SSA for TPD discharge.
Detailed statements and evidence of school misconduct, such as misleading advertisements or enrollment agreements, for Borrower Defense applications.
Academic records, such as transcripts or enrollment verification, for programs like Closed School Discharge.

Locate specific application forms for your chosen cancellation program through official government websites. StudentAid.gov is the primary resource for federal loan forms and detailed program information. Your loan servicer’s website may also provide access to relevant forms and guidance. Ensure you use the most current version of any application form, as requirements and forms can be updated periodically.

Accurately completing the informational fields of these forms demands precision. Any discrepancies or missing information could delay processing or lead to denial. Ensure all personal details, loan information, and supporting documentation align perfectly. Before submitting, create and retain copies of all completed forms and supporting documents for your personal records.

Submitting Your Request

Once your application is fully prepared, submit it to the appropriate entity. The method of submission varies depending on the specific cancellation program and loan servicer. Many applications, such as those for Public Service Loan Forgiveness or Teacher Loan Forgiveness, typically require mailing completed forms to your loan servicer. Some programs may offer online submission through secure portals on the Federal Student Aid website or your servicer’s platform.

When mailing a physical application, use certified mail with a return receipt. This provides legal proof that your application was sent and successfully received, including the date of delivery. This documented proof can be invaluable if any questions arise regarding your submission status. For online submissions, always ensure you receive a confirmation number or email verifying successful upload and receipt.

Immediately after submitting your request, record the date and any confirmation numbers provided. Keep these details, along with your copies of the application and supporting documents, in a secure and accessible location. This organized record-keeping will assist you in tracking your application’s progress and responding to any inquiries during the review process.

What Happens After You Apply

After submitting your application, the processing period varies significantly depending on the program and application volume. While some processes might be quick, others, such as Borrower Defense to Repayment or complex TPD applications, could take several months or longer. It is common for the loan servicer or the Department of Education to request additional information or clarification during this review period. Promptly responding to these requests helps avoid further delays.

Notification of a decision typically arrives through official channels, such as mail, email, or updates to your online loan servicing account. You should receive a formal communication indicating whether your application has been approved or denied. Regularly check your preferred communication method and your loan servicer’s online portal for updates.

If your application is approved, your loan balance will be adjusted. You will receive notification of a zero balance if the entire loan is discharged. Depending on the specific program, you might also receive a refund of past payments. Additionally, any negative marks related to the discharged loan, such as delinquencies or defaults, may be removed from your credit history, potentially improving your credit score.

If an application is denied, the notification usually includes the reason. Understanding this reason is important for determining your next steps. You may have options for appeal or reapplication if circumstances change or if you can provide additional supporting documentation. Review the denial letter carefully and seek guidance from your loan servicer or a trusted financial advisor to navigate the process of an appeal or prepare a stronger reapplication if eligible.