Student loans can be discharged, but only 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, disability or death.
We will cover the circumstances under which you may qualify for student loan discharge, as well as your alternative options for handling student loan debt.
When You Can Discharge Student Loans
Interested in discharging your student loans? Here are some of the circumstances under which you may qualify.
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, 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 individuals 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.
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 consider legal action (but that’s up to you and your attorney to determine).
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.
For this to occur, proof of death, such as an original death certificate or certified copy, must be submitted.
Declaring Bankruptcy and Discharging Student Loans
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.
It’s best to consult with a qualified professional, such as an attorney specializing in bankruptcy law, before making any decisions. Also keep in mind that bankruptcy will impact your credit.
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, 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 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 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 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.
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 particular circumstances, it’s important to look at other options for federal loans. Here are some of the other choices you may have to help 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. Usually you must be unable to make monthly loan payments because of financial difficulties, medical expenses or changes in employment.
Deferment: 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.
Income-based repayment: With income-based repayment, you can reduce your monthly student loan payments if too much of your income is currently going toward them. 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 is forgiven.
Cancellation: There is also the possibility of cancellation of Perkins Loans if that is the type of loan you have. You can qualify for up to 100% cancellation if you have 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.
Forgiveness: For 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 other options we’ve discussed, 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.
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.
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, that could result in some or all of your student loans going away, though you may have to pay taxes on the discharged balance.
If you don’t qualify for student loan discharge or some of the alternatives, 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.
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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.