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Can Student Loans Be Discharged?

March 27, 2019 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Can Student Loans Be Discharged?

Let’s be honest: student loan discharge is a super complex topic. We’re going to try to break it down the best we can, but first we want to level with you and mention that this information is general in nature, which means it’s not taking your specific situation into consideration.

So rather than taking this as advice, we hope it helps you get up to speed on student loan discharge. And of course, SoFi always recommends that you speak to a professional about your unique situation.

For the uninitiated, terms like “student loan forgiveness,” “cancellation,” or “discharge” might sound a little ominous. But in fact, they relate to how the federal government references dispensing with the remainder of an individual’s debt (and they all mean essentially the same thing ).

Loan cancellation is typically used when talking specifically about Perkins Loans , while loan forgiveness is more often a reference to debt relief thanks to your job, via programs like the Teacher Loan Forgiveness program or Public Service Loan Forgiveness program.

However, federal student loan discharge refers to eliminating your requirement to pay back some or the entire remaining amount of your debt due to more unique life situations, such as school closure or death.

Essentially, if your job itself qualifies you to stop making student loan payments, it’s generally called forgiveness or cancellation. Other circumstances, like sudden disability, are when the term discharge typically comes into play.

If you are asking how to discharge student loans, first keep in mind it’s almost 100% certain that you will have to repay your loans even if you do not complete a degree or can’t find a job after graduation. Student loans can only be discharged in these rare circumstances , which are laid out by the Department of Education and subject to change.

Total and Permanent Disability or Death Discharge

To qualify for a federal student loan discharge due to disability , you must qualify for 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 must complete a discharge application, which includes documentation showing you meet the government’s requirements for being considered disabled, in order to be considered for this kind of payment relief.

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 individuals who are eligible for Social Security Disability Insurance, or Supplemental Security Income, you may also qualify for loan discharge by providing documentation about your Social Security award.

Federal student loan discharge may also be granted if the borrower dies, by submitting proof of death such as an original death certificate or certified copy. Parents who have taken out Parent PLUS loans on behalf of a student may also have these loans forgiven if the student dies. If you qualify for a total disability or death discharge, 100% of your loan balance is eliminated.

Unfortunately, not all private student loans give you the option to discharge your loans if you’re permanently disabled. So while you might be able to discharge your federal student loans because of disability outside of the courtroom, that’s not necessarily the case for private loans. If you’re permanently disabled and looking to get out of private loans, you may have to take some sort of legal action (but that’s up to you and your attorney to determine).

Declaring Bankruptcy and Discharging Student Loans

Bankruptcy can help you clear away your debt, but will impact your credit. Filing for bankruptcy does not automatically cancel or discharge your student loans. In fact, your federal student loans will only be possibly eligible for discharge during bankruptcy if you file a separate “adversary proceeding.”

That essentially asks the court to find that repayment of your loans would impose undue hardship on you and any dependents. But again, 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

For a 100% discharge of certain loan types, including Direct Loans, FFEL, and Federal Perkins loans, you can also show that you were unable to complete your degree program because your school closed . However, you must have been enrolled at the time the school closed, or on an approved leave when the school closed, or your school closed within 120 after you withdrew.

Only federal student loans can be discharged directly with the application due to school closure and other circumstances. For private loans, you must contact your lender directly to see if you will qualify with them.

False Certification and Unpaid Refund Discharges

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, if your school falsely certified you had a high school diploma or GED, if you were a victim of identity theft and the loans were issued in your name but not to you, or someone else or your school signed your name on the loan application or promissory note, your loans might be discharged.

If you leave school after getting a loan, your school may also be required to return part of your loan money. You can become 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. Only the amount of the unpaid refund would be discharged in this case.

Alternatives to Discharging Student Loans

Since qualifying for a student loan discharge is extremely rare, it’s important to look at other options for federal loans such as deferment and forbearance, or income-based repayment. There is also the possibility of cancellation of Perkins Loans or student loan forgiveness for certain qualifying public service jobs.

Forbearance temporarily allows you to stop making your federal student loan payments, or reduce the amount you have to pay.

Usually you must be unable to make monthly loan payments because of financial difficulties, medical expenses, or changes in employment.

You can also opt 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.

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. Refinancing can help simplify your repayment process since all of your loans can be taken care of with one monthly payment.

It is important to remember that if you refinance your student loans with a private lender, you will forfeit your eligibility for federal loan benefits such as student loan forgiveness or deferment.

If you refinance with a private lender, you can also change the term length on your student loans. Refinancing your federal or private 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.

Check your rate in two minutes and see if refinancing your student loans could help you with your financial goals!

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice about bankruptcy.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.


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