Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.
Student loans can be discharged in certain circumstances. When federal student loans are discharged, your requirement to pay back some or the entire remaining amount of your debt due is eliminated. However, this usually only happens in unique life situations, such as school closure, permanent disability, or death. However, because of a new student loans bankruptcy process, it may be possible to discharge student loans in bankruptcy.
Ahead, we explain who may qualify for student loan discharge, and other options for managing student loan debt.
When You Can Discharge Student Loans
Interested in discharging your student loans? Wondering when can student loans be discharged during bankruptcy? Here are details about some of the circumstances under which you may qualify for student loan discharge.
Total and Permanent Disability Discharge
To qualify for a federal student loan discharge due to disability, you must have a “total and permanent” disability that can be verified by the U.S. Department of Veterans Affairs, the Social Security Administration, or a qualified doctor. You also must complete a discharge application available at studentaid.gov, which includes documentation showing you meet the government’s requirements for being considered disabled.
Veterans may be eligible for student loan discharge if they can provide paperwork from the VA demonstrating they either have a disability that is 100% disabling due to their service, or are totally disabled due to an individual unemployability rating.
For those borrowers who are eligible for Social Security Disability Insurance or Supplemental Security Income, you may also qualify for loan discharge by providing documentation of your Social Security award.
Not all private student lenders give you the option to discharge your loans if you’re permanently disabled. While you might be able to file an application to discharge your federal student loans because of disability, with private loans, you may have to consider legal action. You should speak to an attorney to determine if that’s the right course of action.
💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.
Student Loan Discharge Due to Death
Federal student loan discharge may also be granted if the borrower dies. Parents who have taken out Parent PLUS loans on behalf of a student may also have these loans forgiven if the student dies.
Proof of death, such as an original death certificate or certified copy, must be submitted in order for the loans to be canceled.
Declaring Bankruptcy and Discharging Student Loans
Can student loans be discharged during bankruptcy? And does bankruptcy clear student loans? The answer is yes to both questions, but the process can be lengthy and somewhat complicated.
Until late 2022, it was challenging and rare for federal student loans to be discharged through bankruptcy. But a new process unveiled by the Justice Department in November 2022, makes it easier. Those filing for bankruptcy must fill out what’s called an attestation form to verify that they fit the definition of “undue hardship.” Their request is then evaluated by the bankruptcy judge under new standards, and their debt may be fully or partially forgiven.
Borrowers must pass a three-part test to prove they qualify for “undue hardship” and should have their federal loans discharged:
1. Is the borrower able to maintain a minimal standard of living while paying their student loans?
2. Have they made a good faith effort to repay the loans?
3. Will they continue to struggle to make payments during the remaining term of their loan?
It’s important to understand that filing for bankruptcy can have serious consequences. For instance, bankruptcy will impact your credit for years. It’s best to consult with a qualified professional, such as an attorney specializing in bankruptcy law, before making any decisions.
Closed School Discharge of Loans
If your school closes, you may be eligible for a 100% discharge of certain loan types, including Direct Loans, FFEL, and Federal Perkins loans. However, for this to apply, you must meet one of the following criteria:
• You must have been enrolled at the time the school closed
• You must have been on an approved leave when the school closed
• Your school closed within 120 days after you withdrew if your loans were first disbursed before July 1, 2020 (180 days if your loans were first disbursed on or after July 1, 2020)
Only federal student loans can be discharged due to school closure and other circumstances. For private loans, you must contact your lender directly to see if you will qualify with them.
Loan Discharge Because You Were Misled By Your College
If you have federal loans, and you feel your school “misled” you — for instance, by promising you’d get certain jobs or certain salaries — you may qualify to apply for Borrower Defense Discharge through the Department of Education. The Biden administration has approved $14.7 billion in relief for 1.1 million borrowers who claim their colleges made such claims, or whose schools closed abruptly, as of July 2023. Note that this program has been challenged in court, and in August 2023, a federal court issued an injunction against the program. That’s delayed payments, but borrowers can still submit an application.
The application process is lengthy and submitting an application does not guarantee that your loans will be canceled.
False Certification Discharge
In very rare circumstances, you may be eligible for a discharge if loans were issued but they should not have been given out to you in the first place. For instance, this may apply if:
• Your school falsely certified that you had a high school diploma or GED
• You had a disqualifying status, such as a physical or mental condition, criminal record or other circumstance, at the time of the school certified your eligibility
• Someone else or your school signed your name on the loan application or promissory note
In all of the above circumstances, your loans might be discharged.
Unpaid Refund Discharge
If you leave school after getting a loan, your school may also be required to return part of your loan money. You may be eligible for a partial discharge if you withdraw from school, and the college did not return the portion it was required to under the law.
In this case, only the amount of the unpaid refund would be discharged.
Alternatives to Discharging Student Loans
Since qualifying for a student loan discharge is only permitted under certain circumstances, it’s important to look at other options for federal loans. Here are some of the other choices you may have to help you pay off your student loan debt:
Forbearance: Forbearance temporarily allows you to stop making your federal student loan payments or reduce the amount you have to pay. You may qualify if you are unable to make monthly loan payments because of financial difficulties, medical expenses, or changes in employment. Usually interest will still accrue while your loan is in forbearance.
Deferment: You may be able to defer your loans in certain circumstances, such as going back to school. Depending on your loan type, your loans may still accrue interest while in deferment. However, if you qualify for deferment on federal subsidized loans, you generally will not be charged interest during deferment.
Income-based repayment: With income-driven repayment, you may be able to reduce your monthly student loan payments if you can’t afford your monthly payments on a Standard Loan Repayment plan. With an IDR plan, you’ll make monthly payments of 10% to 20% of your monthly discretionary income, and then after 20 or 25 years of on-time payments your remaining balance will be forgiven.
Cancellation: If you have a federal Perkins Loan, you may qualify for up to 100% cancellation if you served full-time in a public or nonprofit elementary or secondary school system as a teacher serving low income students or students with disability or teach in a certain field. In addition to teachers, the following jobs may qualify you for partial or whole Perkins Loan cancellation: early childhood education provider, employee at a child or family services agency, faculty member at a tribal college or university, firefighter, law enforcement officer, librarian with master’s degree at Title I school, military service, nurse or medical technician, professional provider of early intervention (disability) services, public defender, speech pathologist with master’s degree at Title I school, volunteer service (Americorps Vista or Peace Corps).
Forgiveness: For borrowers working certain qualifying public service jobs, student loan forgiveness may be an option. With this option, your remaining student loan balance will be forgiven after you make 120 qualifying monthly payments while working full-time for a qualifying employer, which can include government organizations and certain not-for-profit organizations.
When to Refinance Your Student Loan Debt
Unlike student loan forbearance or deferment, which are temporary, short-term solutions, student loan refinancing can be a long-term debt solution. If you don’t qualify for the options mentioned above, refinancing can help simplify your repayment process since all of your loans can be taken care of with one monthly payment. If you refinance with a private lender, you can also change the term length on your student loans.
Should you refinance your student loans? You’ll need to weigh the pros and cons. One very important consideration is that if you refinance your federal student loans with a private lender, you will forfeit your eligibility for federal loan benefits, including student loan forgiveness or deferment.
Recommended: Student Loan Refinancing Guide
The Takeaway
As you can see, it is possible to discharge student loans, but only in unique life circumstances, such as disability or false certification. If you do qualify, you may not have to pay some or all of your student loans, though you may have to pay taxes on the discharged balance.
If you don’t qualify for student loan discharge or one of the alternatives programs, refinancing your student loans with a private lender like SoFi can help get you a potentially lower interest rate, or a lower monthly payment if you extend your loan term. (You may pay more interest over the life of the loan if you refinance with an extended term.) Using a student loan refinance calculator can show you how much you might save. Plus, with SoFi, there are no fees, and you find out if you prequalify in two minutes.
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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