With College Savings Month in full swing, consumers are celebrating by kicking off their college savings plans or simply educating themselves about budgeting for college and the types of loans available. But, what happens after that glorious graduation day? Student loan repayment options you might consider include income-based repayment, consolidation, or even deferment or forbearance. But also remember that in certain situations, you can have your federal student loan forgiven, canceled, or discharged. Use this guide to discover if you fall under any of these circumstances.
Discharge in Bankruptcy: It is very rare that this will happen, but if you are filing for either Chapter 7 or Chapter 13 bankruptcy and can prove that the repayment of your student loan would cause you undue hardship, then you may be eligible for a discharge. Please note there are several requirements you must meet to prove hardship. Eligible: Direct loans, Federal Family Education Loan Program, Perkins loans
Closed School Discharge: If your school closes while you’re enrolled and you do not complete your degree because of the closure, you are eligible for discharge of any loan taken out to fund your education at the school. Eligible: Direct loans, Federal Family Education Loan Program
Unpaid Refund Discharge: If you withdrew from your education, but the school didn’t pay a refund that it owed you may be eligible. However, only the amount of the unpaid refund will be discharged. Eligible: Direct loans, Federal Family Education Loan Program
Teacher Loan Forgiveness: If you are a teacher (and a new borrower) and have been teaching full time in a low-income elementary or secondary school or education service agency for five consecutive years, you may be able to have as much as $17,500 of your loans forgiven. Eligible: Direct loans, Federal Family Education Loan Program
Public Service Loan Forgiveness: If you are employed in certain public service jobs and have made 120 payments on your loans, the remaining balance that you owe may be forgiven. Please note that you must not be in default. Eligible: Direct loans
For more information about the requirements and restrictions of these circumstances and more information about other situations eligible for forgiveness, cancellation, and discharge please review the Federal student Aid Office website.
Have you had your student loans forgiven, canceled, or discharged? What was your experience?