Loan Cancellation/Forgiveness/Discharge Conditions: Detailed Explanations
Cancellation is possible only in rare cases if the bankruptcy court rules that repayment poses an undue hardship to the borrower.
Closed School Cancellation
Your loan will be cancelled if you (or the student for whom you borrowed a Direct or Federal PLUS Loan) received, on or after Jan. 1, 1986, a portion or the entire loan to attend a school that closed before you completed your program of study. You must have been unable to complete the program because:
- the school closed while you were enrolled,
- the school closed while you were on an approved leave of absence or you withdrew within 90 days of the school closing, and
- you were unable to transfer credits or hours earned at the closed school.
Your loan will be cancelled if you (or the student for whom you borrowed a Direct or Federal PLUS Loan) die. A certified death certificate is required.
Educational Component of Head Start Program Staffer Cancellation
Fifteen percent of your original principal loan amount - plus the interest that accrued during the year - will be cancelled for each complete school year you are a full-time staff member, regularly employed in a full-time professional capacity to carry out the educational part of a Head Start program. The program must operate for a full academic year or its equivalent, and your salary may not be more than that of a comparable employee working in the local educational agency.
False Certification by School Cancellation
Your loan will be cancelled if the school falsely certified your eligibility for the loan. To qualify for a false certification loan cancellation, you (or the student for whom you received a Direct or PLUS Loan) must have received funds for a loan disbursed, in whole or in part, on or after January 1, 1986, and:
- the school admitted you when you did not meet the requirements for admission on the basis of your ability to benefit from the education, or
- at the time the school certified the loan, you had a condition that prevented you from meeting the legal requirements for employment in your state of residence in the occupation for which the program was intended, or
- the school signed your name on the application and/or promissory note without your authorization, and you did not receive the benefit of the loan proceeds, or
- the school endorsed your name on the loan check or signed the authorization for electronic funds transfer or master check without your consent, and you did not receive the benefit of the loan proceeds.
False Certification Due to Identify Theft Cancellation
Effective July 1, 2008, your loan may be cancelled if it was disbursed on or after January 1, 1986 and falsely certified as a result of a crime of identity theft. To qualify for an identity theft cancellation, you must provide your loan holder/servicer with a copy of a local, state, or federal court verdict or judgment that conclusively names you (or the loan’s endorser) as the victim of a crime of identity theft by a perpetrator named in the verdict or judgment.
Fire Fighter Cancellation
Your loan will be cancelled if you serve full time as a fire fighter for service to a local, state, or federal fire department or fire district.
Law Enforcement or Corrections Officer Cancellation
Your loan will be cancelled if you serve full time as a qualifying law enforcement or corrections officer. To establish eligibility, the school must determine that your:
- employing agency is eligible; i.e., a local, state, or federal agency that is publicly funded and its activities pertain to crime prevention, control, or reduction or to the enforcement of the criminal law and
- position is essential to the agency's primary mission; i.e., you are a sworn officer or person whose principal responsibilities are unique to the criminal justice system.
Your loan will be cancelled if you serve as a librarian, you have a master's degree in library science, and you are employed in either:
- an elementary school or secondary school that is eligible for assistance under Part A of Title I of the Elementary and Secondary Education Act of 1965 or
- a public library that serves a geographic area that contains one or more schools eligible for assistance under Part A of Title I of the Elementary and Secondary Education Act of 1965.
Military Service Cancellation
You are entitled to cancellation of up to 50 percent of your loan for full-time, active duty service in the U.S. Armed Forces in an area of hostilities or an area of imminent danger that qualifies for special pay under Section 310 of Title 37 of the U.S. Code. The cancellation rate for every complete year of qualifying service is 12.5 percent of the original principal loan amount, plus any interest that accrued during the year.
Nurse or Medical Technician Cancellation
Your loan will be cancelled if you serve full time as a nurse or medical technician providing health care services.
Professional Provider of Early Intervention Services for the Disabled Cancellation
Your loan will be cancelled if you are a full-time, qualified professional provider of early intervention services in a public or other nonprofit program under public supervision. Early intervention services are defined as developmental services that:
- are provided at no cost, except where federal or state law provides for a system of payments by families, including a schedule of sliding fees;
- are designed to meet the developmental needs of an infant or toddler with a disability in one or more of the following areas: physical development, cognitive development, communication development, social or emotional development, or adaptive development;
- meet the standards of the state in which they are provided;
- are provided by special educators; speech and language pathologists and audiologists; occupational therapists; physical therapists; psychologists; social workers; nurses; nutritionists; family therapists; orientation and mobility specialists; and pediatricians and other physicians;
- to the maximum extent appropriate, are provided in natural environments, including the home and community settings in which children without disabilities participate; and
- are provided in conformity with an individualized family service plan adopted in accordance with Section 636 of the Individuals with Disabilities Education Act.
Public or community defender
Full-time attorneys employed in federal public defender organizations or community defender organizations are eligible for public defender cancellations.
- A community defender organization is a defender organization established in accordance with section 3006A(g)(2)(B) of Title 18, United States Code; and
- A federal public defender organization is a defender organization established in accordance with section 3006A(g)(2)(A) of Title 18, United States Code.
Cancellations are for eligible service that includes August 14, 2008, or begins on or after that date, regardless of whether information on the expansion of this cancellation category appears on the borrower's promissory note.
Public or Non-Profit Child or Family Services Agency Employee Cancellation
Your loan will be cancelled if you serve as a full-time employee of an eligible public or private nonprofit child or family service agency providing or supervising the provision of services to both high-risk children who are from low- income communities and the families of such children.
Loan Forgiveness for Public Service Employees with Direct Loans
You may be eligible to have the interest and principal of your non-defaulted Direct Loans forgiven if you:
- made 120 monthly payments on eligible loans after October 1, 2007 and
- are employed in a public-service job at the time of such forgiveness and have been employed in a public-service job during the 120-month period (excluding time served as a Member of Congress).
- Emergency management
- Military service
- Public safety
- Law enforcement
- Public health
- Public education
- Social work in a public child or family service agency
- Public interest law services
- Early childhood education
- Public services for individuals with disabilities or for the elderly
- Public library sciences
- School-based library sciences and other school-based services
- Faculty member at a Tribal College or University and other faculty teaching in high-needs subject areas or areas of shortage
Borrowers with loans in the Federal Family Education Loan (FFEL) Program can request this forgiveness program by consolidating their loans into a Direct Consolidation Loan.
Speech-Language Pathologist Cancellation
Your loan will be cancelled if you serve as a full-time speech language pathologist, you have a master's degree, and you are working exclusively with schools that are eligible for assistance under Title I of the Elementary and Secondary Education Act of 1965.
Spouses and Parents of September 11, 2001 Victims and Public Servants Cancellation
Survivors of victims of the September 11, 2001 terrorist attacks may be eligible for discharge of their entire outstanding student loan balance. No refunds are granted on payments made prior to discharge. Documentation of the victim's presence at the September 11, 2001 terrorist attacks, public servant status, or death or permanent disability may be required.
Teacher Loan Forgiveness
Certain teachers who have outstanding Direct Subsidized or Unsubsidized Loans / Federal Stafford Loans (subsidized or unsubsidized) or Direct Consolidation Loans / Federal Consolidation Loans may be eligible to have a portion of their loans forgiven (in other words, they won't have to repay that portion of their debt). There are two different teacher loan forgiveness maximums–$5,000 and $17,500–each with their own set of eligibility criteria (provided below).
To qualify for teacher loan forgiveness up to $5,000, teachers must meet all of the following criteria:
- You must not have had an outstanding balance on a Federal Family Education Loan (FFEL) Program or William D. Ford Federal Direct Program loan as of October 1, 1998 or on the date you obtained a FFEL Program or Direct Loan after October 1, 1998.
- You must have taught full time at a designated school for five consecutive, complete academic years. At least one of the years of teaching service must have been after the 1997-98 academic year.
- The loan for which you are requesting forgiveness must have been made before the end of your fifth year of qualifying teaching service.
- You must have performed your teaching service at an elementary or secondary school, or at a location operated by an educational service agency, in a low-income school district that is listed in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits.
- If you performed your teaching service in an elementary school, the chief administrative officer of the school (or educational service agency) where you performed the service must certify that you demonstrated knowledge and teaching skills in reading, writing, mathematics, and other areas of the elementary school curriculum.
- If you performed your teaching service in a secondary school, the chief administrative officer of the school (or educational service agency) where you performed the service must certify that you taught in a subject area that was relevant to your academic major.
- If your teaching service began on or after October 30, 2004, you must meet this additional criteria: The chief administrative officer of the school (or educational service agency) where you performed your service must certify that you meet the definition of "highly qualified" in the No Child Left Behind Act of 2001.
To qualify for up to $17,500 in forgiveness, you must meet of the criteria above and the following additional criteria:
- You must have been either (1) employed full time as a highly qualified mathematics or science teacher in an eligible secondary school, or (2) employed full time as a highly qualified special education teacher whose primary responsibility was to provide special education to children with disabilities in an eligible elementary or secondary school.
- The chief administrative officer of the school (or educational service agency) where you performed your service must certify that you meet the definition of "highly qualified" in the No Child Left Behind Act of 2001.
To apply for teacher loan forgiveness or for more information about the program for these loan types, contact your loan holder.
Certain teachers who have outstanding Federal Perkins Loans may be eligible to have up to 100 percent of their loans cancelled (in other words, they won't have to repay their loan debt). To qualify for these provisions, you must serve full time in a public or non-profit elementary or secondary school system, which can include employment by an educational service agency, as a:
- teacher in a school serving students from low-income families;
- special education teacher, including teachers of infants, toddlers, children, or youth with disabilities; or
- teacher in the fields of mathematics, science, foreign languages, or bilingual education or in any other field of expertise that is determined by a state education agency to have a shortage of qualified teachers in that state.
Contact the school you attended to inquire about teacher loan forgiveness in the Federal Perkins Loan Program.
Tribal College or University Faculty Cancellation
Your loan will be cancelled if you serve as a full-time faculty member at a Tribal College or University.
Unpaid Refund Cancellation
A portion of your loan (and applicable interest and fees) will be cancelled if:
- you (or the student for whom you borrowed a PLUS Loan) received funds for a loan disbursed, in whole or in part, on or after Jan. 1, 1986,
- you withdrew from, were terminated from, or did not attend the school, and a refund of Title IV funds should have been made, and
- the refund was not made.
Note: You may not apply for this cancellation if you currently are attending the school. In addition, if the school currently is open, you may not apply for this type of cancellation unless you have first contacted the school and attempted to resolve the issue. If the issue is not resolved, you may then apply.
VISTA or Peace Corps Volunteer Cancellation
Up to 70 percent of your loan will be cancelled if you serve as a Peace Corps or ACTION volunteer. Schools apply cancellation for volunteer service in the following increments:
- 15 percent of the original principal loan amount - plus any interest that accrued during the year - for each of the first and second 12-month periods of service; and
- 20 percent of the original principal loan amount - plus any interest that accrued during the year - for each of the third and fourth 12-month periods of service.