Federal Loan Discharge and Forgiveness

Loan Discharge

A loan discharge is a release of a borrower's obligation to repay his or her student loan. A lender may discharge all or just a portion of a borrower's loans. Borrowers should contact their loan holders to determine if their loans are eligible for discharge. If a borrower does not know who their loan holder is they may visit the National Student Loan Data System Web site.

The following circumstances may warrant a loan discharge:

Bankruptcy:

Federal student loans are no longer dischargeable through bankruptcy, although collection activity may be suspended for a short time. Learn more >

Closed school:

If a borrower is unable to complete his or her program of study due to the closing of a school (not just the program of study), the borrower may qualify to have his or her applicable loans discharged. To find out the day a school officially closed, visit the Closed School Search Page. The School Closure Discharge Application is available online.

Death:

If a borrower of a loan dies, the loan will be discharged by the lender. In the case of a parent PLUS loan, if the dependent student for which the PLUS loan was obtained dies, the loan is discharged.

False Certification:

If a school falsely certifies a loan for a student that did not attend that school or did not authorize any loan funds to be taken, a borrower qualifies for a false certification loan discharge. Learn More >

Total and Permanent Disability:

A borrower who is totally and permanently disabled may obtain a conditional discharge by the U.S. Department of Education. A new Web site has been implemented for the Total and Permanent Disability (TPD) Discharge process. Borrowers seeking a disability discharge of their Family Federal Education Loan (FFEL) Program loans, William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Perkins Loan Program loans, and Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligations will find complete information at the new TPD Discharge Web site.

The TPD Discharge Web site serves as an online information resource center for the TPD Discharge process. It has a user-friendly interactive graphic that explains the steps involved in the TPD Discharge process from submission of a discharge application through final discharge. Users can also find the TPD Discharge application form, definitions of roles and responsibilities, and important contact information.

Unpaid Refund Discharge Program:

The Unpaid Refund Discharge Program is open to Federal Family Education Loan Program, Federal Direct Loan Program, and Federal Consolidation Loan Program borrowers whose loans were disbursed on or after January 1, 1986. To be eligible for discharge a borrower must have withdrawn, been terminated from, or not attended the school after enrollment. It must be found that the school should have refunded the Title IV funds, but did not, for the borrower's debt to be discharged.

It must be noted that the borrower may not apply for this cancellation if they are currently attending the school. In addition, if the school is currently open, they may not apply for cancellation unless they have first contacted the school and attempted to resolve the issue. A downloadable Unpaid Refund Discharge application is available.

Loan Forgiveness

Due to a borrower's willingness to provide certain public services, all or a portion of his or her loan may be forgiven, which is the release of a borrower's obligation to repay his or her student loan. The most common form of loan forgiveness comes from the Teacher Loan Forgiveness Program.

Teacher Loan Forgiveness

Teachers who are new borrowers as of October 1, 1998, with no outstanding loan balance on a Federal Family Education Loan Program or Federal Direct Loan Program loan as of that date, or the date the borrower obtained a loan after October 1, 1998, may qualify for teacher loan forgiveness if they teach full-time for five consecutive years in a low-income school. The U.S. Department of Education has a directory of public and private nonprofit elementary and secondary schools designated as having a high concentration of students from low-income families. There are two applications associated with Teacher Loan Forgiveness, one for forbearance and one for forgiveness. Both applications should be completed and returned to the borrower's servicer or lender.