Student Loan Forgiveness 101: How to Get Student Loans Forgiven, Discharged, or Canceled

Updated May 4, 2022

Student loan forgiveness (also known as cancellation and discharge of student loans) is the act of releasing a borrower from their obligation to repay all (or a portion) of their federal student loan(s), including the principal and interest. It is only provided under certain circumstances, to those with federal loans, and to borrowers who meet certain eligibility requirements. While it may seem hard to qualify for student loan forgiveness (see how less than 1% of applicants were approved for Public Service Loan Forgiveness), it’s helpful to understand the circumstances that would qualify for student loan forgiveness so you can be sure you aren’t missing out. There are a variety of options available, all of which intend to reduce or eliminate student loan debt.

This introductory guide to student loan forgiveness aims to help readers familiarize themselves with the options and eligibility requirements for federal student loan forgiveness. It includes student loan forgiveness categories, income-driven repayment plans, state, and city-sponsored forgiveness options, as well as explains what happens once a student loan forgiveness application is approved or denied.

Keep in mind that the bottom line is that unless your circumstances line up with these mentioned, you’ll have to pay your loans according to the promissory note you signed – even if you were a minor when you signed it, can’t find employment, or aren’t happy with your education.

What is Student Loan Forgiveness?

If you meet certain criteria, you may qualify for some form of student loan forgiveness. Student loan forgiveness means that when a borrower meets the eligibility requirements, the remaining balance on their loans will be reduced to zero.

Student Loan Forgiveness, Cancellation & Discharge Differences

Although student loan forgiveness, cancellation and discharge may sound similar, they do have slight differences. 

• Student Loan Forgiveness: This type of loan forgiveness often results from working a qualifying job for a specified amount of time. Often, student loan forgiveness is tax-free.
• Student Loan Cancellation: Also frequently job-related, the major difference between student loan forgiveness and cancellation is that student loan cancellation often is not tax-free.
• Student Loan Discharge: Student loan discharge is normally granted due to circumstances outside of the borrower’s control. One example of this would be if the organization funding a borrower’s loans shut down entirely, then their student loans may be discharged.

Student Loan Forgiveness & Discharge Options

There are a variety of circumstances that may lead to federal student loan forgiveness. However, none are guaranteed and each circumstance may or may not apply to the borrower’s particular type of federal loan. 

Furthermore, certain categories of loan forgiveness mandate that applicants meet certain eligibility requirements, including items such as qualified monthly payments and qualifying employment. 

The following list highlights the different federal loan forgiveness categories, but borrowers should also review this chart, from the Federal Student Aid Office, to ensure their circumstance applies to their particular federal loan type (Direct Loans, FFEL Program Loans, and Perkins Loans):

• Closed School Discharge
• Total and Permanent Disability (TPD) Discharge
• Death Discharge
• Discharge in Bankruptcy (rare)
• False Certification of Student Eligibility or Unauthorized Payment Discharge
• Unpaid Refund Discharge
• Teacher Loan Forgiveness
• Public Service Loan Forgiveness
• Perkins Loan Cancellation and Discharge
• Borrower Defense Discharge
• Income Based Repayment (IBR)
• Pay as you earn (PAYE)
• Revised Pay As You Earn (REPAYE)
• Military Student Loan Forgiveness

Borrowers who believe they may qualify for student loan forgiveness are encouraged to read more about the possibilities related to federal student loan forgiveness and cancellation. These borrowers should also contact their loan servicer (the company handling billing and services related to the student loan) to further discuss their options.

Finally, if a student loan forgiveness application is placed under review, borrowers should continue to make payments on their loan — to prevent it from going into default or accumulating additional interest — until all final decisions are made.

Public Service Loan Forgiveness

If you work in the public service sector, for example in a government organization or nonprofit, then you may qualify for Public Service Loan Forgiveness (PSLF).

If you meet the eligibility requirements for PSLF, then after making 120 qualifying monthly payments, the remaining balance on your student loans will be forgiven. Here are the types of student loans eligible for PSLF.

• Direct subsidized and unsubsidized loans
• Direct PLUS loans
• Direct consolidation loans
• Federal Perkins Loans & Family Education Loans only if they are consolidated via a direct consolidation loan

It’s important to note that payments must be made under either standard loan repayment terms or under an Income-Driven Repayment plan. You must also recertify for PSLF each year by submitting an Employment Certification for Public Service Loan Forgiveness. 

Income-Driven Repayment Plans & Student Loan Forgiveness

The Federal Government’s four income-driven student loan repayment plans forgive a student’s remaining loan balance after either 20 or 25 years. These payment plans work by creating a set, monthly payment amounts that are based on what is affordable for the borrower’s income and family size. After making qualified payments for the entirety of the repayment period, the loan’s remaining balance is forgiven. Applying for an income-driven repayment plan is free with the Federal Government, and per Federal Student Aid (an office of the Department of Education) at StudentLoans.gov, “most federal student loans are eligible for at least one income-driven repayment plan.” The repayment plans — and a few of their details —include:

Income-Based Repayment (IBR Plan):

The IBR Plan requires that a borrower meets certain eligibility requirements. Depending on when the loan was issued, monthly payments are generally 10 percent or 15 percent of the borrower’s discretionary income, and the repayment period is either 20 or 25 years.

The following loans are eligible for Income-Based Repayment plans:

• Direct subsidized and unsubsidized loans
• Direct grad PLUS loans
• Subsidized and unsubsidized FFEL Stafford loans
• FFEL PLUS loans made to grad students
• Consolidated Federal Perkins loans
• Direct consolidation loans, unless used to repay parent PLUS loans or FFEL loans made to parents

Income-Contingent Repayment (ICR Plan):

The ICR Plan is open to all borrowers with eligible federal loans. Payment amounts are the lesser of the two options: either 20 percent of the borrower’s discretionary income or what the borrower would pay on a repayment plan with a fixed payment over the course of 12 years (adjusted according to income). The repayment period is 25 years.

The following loans are eligible for Income-Contingent Repayment (ICR) plans:

• Direct subsidized and unsubsidized loans
• Direct PLUS loans made to grad students
• Direct consolidation loans
• Consolidated FFEL Stafford loans
• Consolidated FFEL loans made to parents
• Consolidated parent PLUS loans
• Consolidated Federal Perkins loans

Pay As You Earn (PAYE Plan):

The PAYE Plan requires that a borrower meets certain eligibility requirements. Payments are generally 10 percent of the borrower’s discretionary income, but it is never more than the 10-year Standard Repayment Plan amount. The repayment period is 20 years.

The following loans may qualify for PAYE plans:

• Direct subsidized and unsubsidized loans
• Direct grad PLUS loans
• Consolidated subsidized and unsubsidized FFEL Stafford loans
• Consolidated FFEL loans made to grad students
• Consolidated Federal Perkins loans
• Direct consolidation loans, unless used to repay parent PLUS loans or FFEL loans issued to parents

Revised Pay As You Earn (REPAYE Plan):

The REPAYE plan is open to all borrowers with eligible federal loans, and payments are generally 10 percent of the borrower’s discretionary income. The repayment period is 20 years for loans solely dedicated to undergraduate study and 25 years when the loans have been used for graduate or professional study.

It’s important to remember that if you’re enrolled in a REPAYE plan, a significant income increase could cause you to pay more than you would on a standard 10-year repayment plan. Be sure to take potential income growth into consideration when you’re choosing a plan.

Loans that qualify for this type of plan include: 

• Direct subsidized and unsubsidized loans
• Direct grad PLUS loans
• Consolidated FFEL Stafford loans
• Consolidated FFEL PLUS loans made to grad students
• Consolidated Federal Perkins loans
• Direct consolidation loans, unless they repaid parent PLUS loans or FFEL loans made to parents

Borrowers using an income-based repayment plan may also be eligible for Public Service Loan Forgiveness. Qualifying for this plan means borrowers with a remaining Direct Loan balance will have loans forgiven after 10 years of qualifying payments, rather than 20 years. Learn more about the program and its qualifications here.

Military Student Loan Forgiveness

If you are serving in the military, then you may be eligible for certain student loan forgiveness programs. While forgiveness options vary by military branch, many personnel can qualify for Public Service Loan Forgiveness (PSLF) by working in qualifying positions for at least 10 years.

The National Defense Student Loan Discharge is also an option for some individuals, and depending on when your service began, could qualify you for up to 100% student loan forgiveness.

State and City-Sponsored Loan Forgiveness Programs

Student loan forgiveness programs may also be offered by particular states and cities. These local-level loan forgiveness programs are often directed at particular professions (for example physicians, health care providers, and teachers) when the city or state faces an employment shortage in a critical profession. Loan forgiveness for those with careers in science, technology, engineering, mathematics, and law are also frequently offered. To find state and city-based loan forgiveness programs, try searching one of the following databases:

• Teachers seeking loan forgiveness programs and funding opportunities may search the American Federation of Teachers database and Teach.org.

• Physicians looking to find states offering loan repayment and forgiveness, as well as scholarship opportunities, will find the Association of American Medical College’s (AAMC) searchable database most useful.

• All other professions may find state-by-state options on College Investor’s database.

How to Apply for Student Loan Forgiveness

If you believe you may be eligible for student loan forgiveness, be sure to contact your student loan servicer to apply. If you have Perkins loans, then either contact the school that issued your loan or reach out to the school’s designated loan servicer.

It’s important to understand the terms of applying for forgiveness. Ask your lender whether you’re required to continue making student loan payments while your loan forgiveness application is being reviewed.

Considerations When Applying for Student Loan Forgiveness

Although student loan forgiveness, cancellation and discharge programs are free through the Department of Education, you should familiarize yourself with their associated costs and risks. For example:

• Taxable Balances: Be prepared to pay any applicable taxes on your forgiven student loan balance, depending on the type of forgiveness or cancellation you’re pursuing.
• Defaulted Loans: Defaulted student loans cannot be forgiven, so be sure to work toward good standing on all your loans before applying for forgiveness. 
• Watch Out for Scammers: Be wary of phishing and scamming attempts promising student loan forgiveness in an attempt to steal your personal information.

Approval or Denial of Student Loan Forgiveness

Approved: Borrowers who are approved for student loan forgiveness are no longer obligated to make student loan payments unless only a certain amount is forgiven. Additional benefits may also include a refund of past payments, the removal of any negative credit records related to default payments, and a renewed eligibility to apply for federal student aid (as long as there are no other defaulted loans). However, there are cases in which the borrower may be responsible for refunding a portion of the loan to the U.S. Department of Education, so it is important to understand and verify every detail throughout the process.

Denied: Borrowers who are denied student loan forgiveness remain responsible for repaying the remaining balance of the loan. Your repayment plan will follow the terms of the promissory note that you have signed. It is unlikely that a final decision can be appealed (with the exception of false certification and forged signature discharges).

Student Loan Discharge or Cancellation for Special Circumstances

In special circumstances, a borrower may have his or her student loans discharged or canceled. If you believe you qualify for a circumstance of this nature, then speak with your loan servicer for more information.

Closed School Discharge

If the school funding your loan closed either during or shortly after you withdrew your loan, then you may qualify for a student loan discharge.

If you meet the following eligibility requirements, then you may be eligible for a closed school loan discharge:

• Your school closed while you were enrolled as a student
• Your school closed while you were on an approved leave of absence
• If your loans were disbursed before July 1, 2020, and the school closed within 120 days of your withdrawal
• If your loans were disbursed after July 1, 2020, and the school closed within 180 days of your withdrawal

Total and Permanent Disability (TPD) Discharge

If you are no longer able to repay your student loans due to becoming entirely and permanently disabled, then you may be eligible for this type of loan forgiveness. You can complete a TPD Discharge application online, print and mail an application, or request an application by phone or email. 

For the purposes of a TPD Discharge, any of the following documents may be considered acceptable proof of disability:

• Documentation from the Department of Veteran Affairs (VA)
• Documentation from the Social Security Administration (SSA)
• Documentation from a physician

For more information about applying and proving eligibility for a TPD Discharge, please visit https://disabilitydischarge.com/.

Student Loan Death Discharge

If the borrower or student passes away during the student loan repayment period, then their federal student loans may qualify for discharge. If the borrower or student took out private student loans, then the person who would become responsible for the loans should speak with the lender regarding next steps.

For federal student loan death discharge, the following documents may be accepted:

• Original death certificate
• Certified copy of the death certificate
• Accurate and complete photocopy of the documents above

Student Loan Bankruptcy Discharge

In rare circumstances, some student loans can be discharged through bankruptcy. These discharges, however, are not automatic. For more information about this type of student loan discharge, please visit https://studentaid.gov/manage-loans/forgiveness-cancellation/bankruptcy.

False Certification Discharge

Student loans may be eligible to be discharged if the school is discovered to have falsely certified the loans. Here are a few examples of reasons you may be eligible for a false certification discharge:

• Ineligible for Employment: If the school approved your student loan, but a status requirement disqualifies you from gainful employment in your field of study, then you may be eligible for disbursement.
• School Falsified Your Ability to Benefit: If the school approved your student loan, but you are unable to benefit from the school’s training for a reason outside of your control, then disbursement may be an option.
• Unauthorized Lending: If you did not grant permission for the school to provide you with a student loan, then you may be eligible for disbursement. These include cases where the school falsely authorized paperwork on your behalf.

Unpaid Refund Discharge

You may be eligible for an unpaid refund discharge if you withdrew from the college or university but a refund has not been granted. You can apply for disbursement of all or some of the loan amount owed to you by the school.

Borrower Defense to Repayment Discharge

This type of discharge is granted to students whose colleges or universities defrauded a large number of students. If a school clearly misrepresents its ability to provide the education promised on a significant scale, then the borrower defense to repayment discharge may apply.

To apply for this discharge, the borrower should file a claim with the U.S. Department of Education. If a qualifying fraud is confirmed, then a disbursement will be issued.

Perkins Loan Cancellation & Discharge

Perkins Loans, including Perkins Teacher loans, may be eligible to be canceled or discharged based on employment, volunteer service or other specific conditions. The below professions may qualify for a Perkins Loan cancellation or discharge:

• Teacher in a school with students from low-income families
• Special education teacher, including teachers of infants, toddlers, children, or children with disabilities
• Teacher of mathematics, science, foreign languages, or bilingual education, or any other field of expertise determined by a state education agency to have a shortage of qualified teachers
• Employee at a child or family services agency
• Firefighter
• Law enforcement officer
• Military service
• Volunteer service (AmeriCorps VISTA or Peace Corps)

Additionally, borrowers may qualify for a Perkins Loan discharge under the following circumstances:

• Bankruptcy
• Death
• School closure
• Veteran service-related disability
• Spousal loss as a result of 9/11
• Total and permanent disability

Student Loan Forgiveness Alternatives

Unfortunately, not all student loans are eligible for forgiveness, cancellation or discharge. Borrowers struggling to repay student loans may choose to place them in deferment or forbearance if they do not qualify for the aforementioned options.

Additionally, borrowers who are ineligible for student loan forgiveness and income-driven repayment plans — as well as borrowers with private student loans — will find that additional money-saving options still exist in the form of student loan refinancing and consolidation. 

No matter the situation, we recommend that borrowers talk to a student loan expert to find the plan and benefits that best suit their short and long-term financial goals. For questions about private and federal student loan refinancing contact the specialists at Education Loan Finance.