There are situations in which you can have your federal student loans forgiven, canceled, or discharged.
Please note that you must pay your student loan even if you can’t find a job, do not finish your education, or are not happy with the education that you paid for with your loan. There are certain situations however that would allow your loan to be forgiven, canceled, or discharged. Below are possible types of forgiveness, cancellation, and discharge:
Closed school discharge
For borrowers who could not complete their program because the school closed while they were enrolled or borrowers who withdrew not more than 90 days before the school closed.
Total and Permanent Disability (or death) Discharge
A total and permanent disability (TPD) discharge releases you from having to repay the following loans:
- William D. Ford Federal Direct Program loan
- Federal Family Education Loan (FFEL)
- Program loan
- Federal Perkins Loan.
Discharge in Bankruptcy (in rare cases)
Cancellation is possible only if the bankruptcy court rules that repayment poses an undue hardship to the borrower.
False Certification of Student Eligibility or Unauthorized Payment Discharge
This happens when a school falsely certifies a borrower's eligibility to receive a loan.
Unpaid Refund Discharge
This may apply if the school does not make the required return of loan funds to the lender. The amount cancelled would be the amount the school was required to return.
Teacher Loan Forgiveness
This applies to full-time teachers for five consecutive years, teaching in a designated elementary or secondary school, or educational service agency serving students from low-income families. (Must meet additional eligibility requirements.)
Public Service Loan Forgiveness
For borrowers who are not in default and who make 120 monthly payments on the loan after Oct. 1, 2007, under certain repayment plans, while the borrower is employed full-time in a public service job. (This applies to the Direct Loan Program only.) You may not apply for forgiveness until after you have made all of the required 120 qualifying monthly payments.
Perkins Loan Cancellation and Discharge (includes Teacher Cancellation)
The Federal Perkins Loan Program cancellations apply to individuals who perform certain types of public service or are employed in certain occupations such as:
- Volunteer in the Peace Corps or ACTION program (including VISTA)
- Member of the U.S. armed forces (serving in area of hostilities)
- Nurse or medical technician
- Law enforcement or corrections officer
- Head Start worker
- Child or family services worker
- Professional provider of early intervention services
For each complete year of service, a percentage of the loan may be canceled. The total percentage of the loan that can be canceled depends on the type of service, the type of loan you have, and when that loan was taken out. You may be eligible to cancel part of or your entire loan.
There is no standard application form for Perkins Loan cancellations. Contact the school that you were attending when you received the loan.
Borrow Defense Discharge
Borrowers may be eligible for forgiveness of the federal student loans used to attend a school if that school misled them or engaged in other misconduct in violation of certain laws.
U.S. Armed Forces
Most branches of the U.S. Armed Forces have loan repayment programs. Specific details can be found at their respective websites or from your local recruiter.
If the borrowers dies, then the loan may be discharged. If you are a parent PLUS loan borrower, then your loan may also be discharged if you die, or if the student on whose behalf you obtained the loan dies.
For more complete information, and to view charts of discharges by loan type as well as discharge applications see the Federal Student Aid Loan Forgiveness Chart.
Additional Resources within Illinois
ISAC (Illinois Student Assistance Commission)
The State of Illinois offers help with student loans for residents who qualify. Normally it requires an obligation to work in Illinois for a specified period for time in a field with a shortage of workers such as teaching or nursing. The following awards made available through various programs administered by ISAC must be approved every year by the Illinois General Assembly and the Governor of Illinois by approving the necessary program funding. Applications are encouraged as soon as possible to ensure that the deadline is not missed, however processing of applications does not begin until the program funds have been approved. Some of these programs are not currently funded due to the state budget. Read the Loan Forgiveness and Repayment Programs page for a full description of the programs, eligibility requirements, and how to apply, and then visit the page regularly for the latest updates regarding the status of the budget and program funding for:
- Illinois Loan Repayment/Forgiveness Programs
- Illinois Teachers Loan Repayment Program
- John R. Justice Student Loan Repayment Program
- Nurse Educator Loan Repayment Program
- Public Interest Attorney Loan Repayment Assistance Program
- Veteran’s Home Nurse Loan Repayment Program