Funding Education Beyond High School: The Guide to Federal Student Aid 2010-11

Is it ever possible to have my federal student loan canceled?

Under certain specific circumstances, you can have all or part of your loan canceled, discharged, or forgiven. For more information, go to www.studentaid.ed.gov/discharges.

In certain cases, you may be able to have all or a part of your loan canceled because:

Your school closed before you completed your program.

Your school forged your signature on your promissory note or falsely certified that you were eligible to get the loan.

Your loan was falsely certified because of identity theft (additional requirements apply).

You withdrew from school but the school didn't pay a refund that it owed under its written policy or our regulations. Check with the school to see how refund policies apply to federal aid at the school.

Your loan may be cancelled if it is discharged in bankruptcy. This is not an automatic process—you must prove to the bankruptcy court that repaying the loan would cause undue hardship.

For teacher service: if you are a new borrower (you did not have an outstanding balance on an FFEL or Direct Loan on Oct. 1, 1998, or on the date you obtained an FFEL or Direct Loan after Oct. 1, 1998) and are a full-time teacher in a low-income elementary or secondary school for five consecutive years, you may be able to have as much as $17,500 of your subsidized or unsubsidized loans canceled. This provision is not available for borrowers of PLUS Loans. For more information visit www.FederalStudentAid.ed.gov/TC or call the Direct Loan Servicing Center at 1-800-848-0979.

For public service: if you are employed 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. Only payments made under certain repayment plans may be counted toward the required 120 payments. You must not be in default on the loans that are forgiven. For more information, go to www.studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp.

Total and Permanent Disability

Your loan may be discharged if you are determined to be totally and permanently disabled and you meet certain requirements. To apply for this discharge, you must provide a physician's statement that you became totally and permanently disabled after the loan was made. For a student who dies, the loan will be canceled if a family member or other representative provides an original or a copy of the original or certified copy of the death certificate to the Direct Loan Servicing Center. You can find more information at www.disabilitydischarge.ed.gov or call the Servicing Center (1-800-848-0979)

The following two charts: Perkins Loan Cancellation Summary and Stafford and PLUS Loan Cancellation Summary are complete lists of discharge/cancellation provisions for Perkins Loans and Stafford Loans.

How do I find out if I can get a loan discharge or cancellation?

After reviewing the conditions, if you think you qualify, you must apply to the holder of your loan.

The information in this guide was compiled in the summer of 2009. For changes to the federal student aid programs since then, visit www.FederalStudentAid.ed.gov.

Cancellation Conditions^a

Amount Forgiven

Bankruptcy (in rare cases—cancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship)^a

100 percent

Closed school (before student could complete program of study)—applies to loans received on or after Jan. 1, 1986^a

100 percent

Borrower’s total and permanent disability^b or death^a

100 percent

Full-time teacher in a designated elementary or secondary school serving students from low-income families^{a, c}

Up to 100 percent

Full-time special education teacher (includes teaching children with disabilities in a public or other nonprofit elementary or secondary school)^{a, c}

Up to 100 percent

Full-time qualified professional provider of early intervention services for the disabled^a

Up to 100 percent

Full-time teacher of math, science, foreign languages, bilingual education, or other fields designated as teacher shortage areas^a

Up to 100 percent

Full-time employee of a public or nonprofit child- or family-services agency providing services to high-risk children and their families from low-income communities^a

Up to 100 percent

Full-time nurse or medical technician^a

Up to 100 percent

Full-time law enforcement or corrections officer^a

Up to 100 percent

Full-time staff member in the education component of a Head Start Program^a

Up to 100 percent

Vista or Peace Corps volunteer^a

Up to 70 percent

Service in the U.S. Armed Forces^a

Up to 50 percent in areas of hostilities or imminent danger

Full-time teacher in a designated educational service agency serving students from low-income families ^d

Up to 100 percent

Full-time special education teacher (includes teaching children with disabilities in educational service agency) ^d

Up to 100 percent

Full-time staff member in a prekindergarten or child care program that is licensed or regulated by a state ^d

Up to 100 percent

Full-time fire fighter ^d

Up to 100 percent

Full-time faculty member at a Tribal College or University ^d

Up to 100 percent

Full-time speech pathologist with a master’s degree working in a Title l-eligible elementary or secondary school ^d

Up to 100 percent

Librarian with a master’s degree working in a Title I-eligible elementary or secondary school or in a public library serving Title I-eligible schools ^d

Up to 100 percent

Full-time attorney employed in a public or community defender organization ^d

Up to 100 percent

Service in the U.S. Armed Forces ^d

Up to 100 percent in areas of hostilities or imminent danger

a As of Oct. 7, 1998, all Perkins Loan borrowers are eligible for all cancellation benefits regardless of when the loan was made or the terms of the borrower’s promissory note. However, this benefit is not retroactive to services performed before Oct. 7, 1998.

b Total and permanent disability is defined as the condition of an individual who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death; has lasted for a continuous period of not less than 60 months; can be expected to last for a continuous period of not less than 60 months; or has been determined by the Secretary of Veterans Affairs to be unemployable due to a service-connected disability. For more information on qualifying for this discharge, contact your loan holder.

c Detailed information on teaching service cancellation/deferment options can be found at www.FederalStudentAid.ed.gov. At the site, click on "Students, Parents and Counselors."

d As of Oct. 7, 1998, all Perkins Loan borrowers are eligible for all cancellation benefits regardless of when the loan was made or the terms of the borrower’s promissory note. Service must include August 14, 2008.

Discharge/Forgiveness Condition

Amount Discharged/Forgiven

Notes

Borrower’s total and permanent disability or death.^†

100 percent

For a PLUS Loan, includes the death, but not disability, of the student for whom the parents borrowed.

Full-time teacher for five consecutive years in a designated elementary or secondary school serving students from low-income families. Must meet additional eligibility requirements.

Up to $5,000 (up to $17,500 for teachers in certain specialties) of the total loan amount outstanding after completion of the fifth year of teaching.

Under the Direct and FFEL Consolidation Loan programs, only the portion of the consolidation loan used to repay eligible Direct Loans or FFEL Loans qualifies for loan forgiveness.

For Direct and FFEL Stafford Loan borrowers with no outstanding balance on a Direct or FFEL Loan on Oct. 1, 1998, or on the date they received a loan on, or after that date. PLUS Loans are not eligible. At least one of the five consecutive years of teaching must occur after the 1997–98 academic year. Teaching at an educational service agency may count toward the required five consecutive years only if the consecutive five-year period includes teaching service at an educational service agency performed after the 2007–2008 academic year.

To find out whether your school is considered a low-income school, go to www.FederalStudentAid.ed.gov. Click on "Students, Parents and Counselors." Or call 1-800-4-FED-AID (1-800-433-3243).

Bankruptcy (in rare cases)

100 percent

Cancellation is possible only if the bankruptcy court rules that repayment poses an undue hardship to the borrower.

Closed school (for borrowers who could not complete their program because the school closed while they were enrolled)

100 percent

For loans received on or after January 1, 1986.

False loan certification (school falsely certified a borrower’s eligibility to receive a loan)

100 percent

For loans received on or after Jan. 1, 1986.

False certification by reason of identity theft (loan was made as a result of the crime of identity theft, as determined by a court).

100 percent

Effective July 1, 2006.

School does not make required return of loan funds to the lender

Up to the amount that the school was required to return.

For loans received on or after Jan. 1, 1986.

Loan forgiveness for public service employees

100 percent of the remaining outstanding balance on an eligible Direct Loan.

For a borrower not in default and who makes 120 monthly payments on the loan after Oct. 1, 2007.

† Total and permanent disability is defined as the condition of an individual who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death; has lasted for a continuous period of not less than 60 months; can be expected to last for a continuous period of not less than 60 months; or has been determined by the Secretary of Veterans Affairs to be unemployable due to a service-connected disability. For more information on qualifying for this discharge, contact your loan holder.

Loan Discharge or Cancellation and Forgiveness

Is it ever possible to have my federal student loan canceled?

How do I find out if I can get a loan discharge or cancellation?