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Student Loans


pacmanx1

Question

Loan Discharge or Cancellation

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

Yes, but only under rare circumstances. A discharge or cancellation releases you from all obligation to repay the loan.

Your loan (Stafford and PLUS) cannot be discharged or canceled because you didn't:

  • Complete the program of study at the school (unless you could not complete the program because the school closed),
  • like the school or program of study, or
  • obtain employment after completing the program of study.


    What qualifies my loan for discharge?
    Discharge refers to the cancellation of a loan, even one in Default, due to school closure, false certification, your death or total and permanent disability.

    What qualifies my loan for cancellation?
    Cancellation or sometimes "forgiveness" of a loan is based on the borrower performing certain types of service such as teaching in a low-income school. A Defaulted loan cannot be canceled based on qualifying service (e.g. teaching).

    For a complete list of discharge and cancellation provisions for Perkins Loans and Stafford Loans, check the following two charts: Perkins Loan Discharge and Cancellation Summary (below) and Stafford and PLUS Loan Discharge and Cancellation Summary (below).

    How do I find out if I can get a discharge or cancellation?
    After reviewing the conditions, if you think you qualify, you must apply to the holder of your loan.

    • Federal Perkins LoansCheck with the school that made you the loan or with the school's loan servicing agent.
    • Direct Stafford LoansContact the Direct Loan Servicing Center at 1-800-848-0979 begin_of_the_skype_highlighting 1-800-848-0979 end_of_the_skype_highlighting. TTY users can call 1-800-848-0983 begin_of_the_skype_highlighting 1-800-848-0983 end_of_the_skype_highlighting. Or, go to www.dl.ed.gov.
    • FFEL Stafford LoansContact your lender or its loan servicing agent.

    Can parents and graduate and professional degree students with PLUS Loans ever have their loan discharged or canceled?

    These rules apply to Stafford and PLUS Loans (for parents and graduate and professional degree students):

    Perkins Loan Discharge and Cancellation Summary Chart Cancellation Conditionsa Amount Forgiven Bankruptcy (in rare casescancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship)100 percentClosed school (before student could complete program of study)applies to loans received on or after Jan. 1, 1986100 percentBorrower's total and permanent disability or deathb100 percentFull-time teacher in a designated elementary or secondary school serving students from low-income familiescUp to 100 percentFull-time special education teacher (includes teaching children with disabilities in a public or other nonprofit elementary or secondary school)cUp to 100 percentFull-time qualified professional provider of early intervention services for the disabledUp to 100 percentFull-time teacher of math, science, foreign languages, bilingual education, or other fields designated as teacher shortage areasUp to 100 percentFull-time employee of a public or nonprofit child- or family-services agency providing services to high-risk children and their families from low-income communitiesUp to 100 percentFull-time nurse or medical technicianUp to 100 percentFull-time law enforcement or corrections officerUp to 100 percentFull-time staff member in the education component of a Head Start ProgramUp to 100 percentVista or Peace Corps volunteerUp to 70 percentService in the U.S. Armed ForcesUp to 50 percent in areas of hostilities or imminent danger<A name=example2>aAs 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

    A href="http://studentaid.ed.gov/students/publications/student_guide/2008-2009/english/importantterms.htm#promissorynote">Promissory Note. However, this benefit is not retroactive to services performed before Oct. 7, 1998.

    bTotal and permanent disability is defined as the inability to work and earn money because of an illness or injury that is expected to continue indefinitely or to result in death. If you are determined to be totally and permanently disabled based on a physician's certification, your loan will be conditionally discharged for up to three years. This conditional discharge period begins on the date you became totally and permanently disabled, as certified by your physician. During this conditional discharge period, you do not have to make payments on your loan(s). To qualify for a final discharge due to total and permanent disability, you must meet the following requirements during the conditional discharge period: (1) your earnings from employment must not exceed the poverty line amount for a family of two; and (2) you must not receive any additional loans under the FFEL, Direct Loan or Perkins Loan programs. If you do not continue to meet these requirements at any time during or at the end of the conditional discharge period, your loan(s) will be taken out of conditional discharge status and you must resume making payments on your loans. You cannot qualify for loan discharge based on a condition that existed before the loan was made, unless a doctor certifies that your condition substantially deteriorated after you obtained the loan. For more information on qualifying for this discharge, review your Promissory Note and Borrower's Rights and Responsibilities Statement or contact your loan holder.

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

    Stafford and PLUS Loan Discharge and Cancellation Summary Chart Discharge/Forgiveness Condition Amount Discharged/Forgiven Notes Borrower's total and permanent disability or death.100 percentFor 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 the date they received a loan. PLUS Loans are not eligible. At least one of the five consecutive years of teaching must occur after the 1997-98 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 begin_of_the_skype_highlighting 1-800-4-FED-AID end_of_the_skype_highlighting (1-800-433-3243 begin_of_the_skype_highlighting 1-800-433-3243 end_of_the_skype_highlighting).Bankruptcy (in rare cases)100 percentCancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship.Closed school (before student could complete program of study) or false loan certification.100 percentFor loans received on or after January 1, 1986.False loan certification now includes identity theft.100 percentEffective 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 January 1, 1986.Total and permanent disability is defined as the inability to work and earn money because of an illness or injury that is expected to continue indefinitely or to result in death. If you are determined to be totally and permanently disabled based on a physician's certification, your loan will be conditionally discharged for up to three years. This conditional discharge period begins on the date you became totally and permanently disabled, as certified by your physician. During this conditional discharge period, you do not have to make payments on your loan(s). To qualify for a final discharge due to total and permanent disability, you must meet the following requirements during the conditional discharge period: (1) your earnings from employment must not exceed the poverty line amount for a family of two; and (2) you must not receive any additional loans under the FFEL, Direct Loan or Perkins Loan programs. If you do not continue to meet these requirements at any time during or at the end of the conditional discharge period, your loan(s) will be taken out of conditional discharge status and you must resume making payments on your loans. You cannot qualify for loan discharge based on a condition that existed before the loan was made, unless a doctor certifies that your condition substantially deteriorated after you obtained the loan. For more information on qualifying for this discharge, review your Promissory Note and Borrower's Rights and Responsibilities Statement or contact your loan holder.

    http://studentaid.ed.gov/students/publications/student_guide/2008-2009/english/loancancellation.htm

[*]A PLUS Loan cannot be discharged because you or the student didn't complete your program of study at your school (unless you or the student couldn't complete the program because the school closed).[*]A PLUS Loan cannot be canceled because you or the student didn't like the school or the program of study.[*]A PLUS Loan cannot be canceled because you or the student didn't obtain employment after completing the program of study.

Edited by pacmanx1
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  • HadIt.com Elder

You can also have them forgiven if you meet certain means testing. There is, as of July 2009, a new category of income based repayment that caps your repayment at 15% of your income, but it takes family size and AGI into account.

I have 40,000 in loans, a joint AGI of 36000, but 4 children and Im married. The calculation returned from my loan figures and the bank states that I am in 'repayment' but my repayment is 0.00. My credit reports show im in repayment, and they will check it every year based on my taxes filed. If you file jointly your spouses loans are allowed to count as well, since your AGI is joint so are your expenses. If you start making more, they start inching the payment up. The starting payment amount is the interest only. After 25 years, the remaining balance is forgiven.

CAS

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  • HadIt.com Elder

If you're a Federal employee, or working in the public interest, your Stafford loans will be forgiven in TEN years. Income Based Repayment Plan plus Public Interest Loan Forgiveness = WIN!

You can also have them forgiven if you meet certain means testing. There is, as of July 2009, a new category of income based repayment that caps your repayment at 15% of your income, but it takes family size and AGI into account.

I have 40,000 in loans, a joint AGI of 36000, but 4 children and Im married. The calculation returned from my loan figures and the bank states that I am in 'repayment' but my repayment is 0.00. My credit reports show im in repayment, and they will check it every year based on my taxes filed. If you file jointly your spouses loans are allowed to count as well, since your AGI is joint so are your expenses. If you start making more, they start inching the payment up. The starting payment amount is the interest only. After 25 years, the remaining balance is forgiven.

CAS

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Hello,

If you are 100% P/T you can have all student loans discharged and the money that you paid into will be refunded retroactive to the date of your permanent and total rating date. I had $80,000 discharged and received a refund of approximately $2.50 because I did not make any payments.

Hugh

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