The first and best option for a student loan is discharging it. Discharges are not easy to get, but if you get one, then your loan will be treated as if it never existed.
1. Get an application
Call the United States Department of Education at (800) 433-3243 for an application to discharge your student loans or ask the holder of your loans for one.
A student loan may be discharged for the following reasons:
- Death of the borrower
- Bankruptcy (in some cases)
- Total and permanent disability
- Closed-school or false-certification defenses
- Identity theft or unauthorized payment
- Inability to benefit
- Unpaid refund
Technically, student loans can be discharged in bankruptcy, but the law makes this very difficult. You must prove that repaying the loan will impose an undue hardship on you and your dependents. You must show that you are not to blame for your financial situation and you can't afford to pay your living expenses while still making loan payments.This means, for example, that you cannot afford to pay the loans and pay your rent and buy food.
Proving undue hardship is much harder than it sounds. It requires you to show three things:
- You tried to pay;
- You can't pay and maintain a minimal standard of living; and
- You have made good faith efforts to repay the loans. (This means that you have done everything you can to make the payments, but have still not been able to pay them.)
It's rare for bankruptcy to clear each hurdle and successfully discharge a student loan. So, if you financed all of your education on a government loan, that loan probably won't get discharged in bankruptcy.
There's no statute of limitations on student loans, so collectors can try to collect for the rest of your life.
For more information about discharging student loans in bankruptcy, and a sample complaint, see the National Consumer Law Center's (NCLC) student resources.
Total and permanent disability
If you are totally and permanently disabled, and unable to find work because of your disability, you may be able to get a disability discharge. Only FFEL, Perkins Loan or Direct Loan program loans can be discharged due to total and permanent disability. Recipients of TEACH grants may also discharge their service obligations by showing a total and permanent disability.
To discharge student loans for disability, you must have medical proof. You must apply directly to whoever holds your loan. You also must allow any doctor, hospital, or other institution with records about your disability to make those records available to the holder of your loan.
In your application, you must include a certification from a doctor of medicine or osteopathy who is licensed to practice in the United States.
The Department of Education defines substantial gainful activity as "a level of work performed for pay or profit that involves doing significant physical or mental activities, or a combination of both."
The doctor's certification must state that you are unable to engage in a substantial gainful activity because of an illness or injury that:
- Is expected to result in death
- Is expected to last for a continuous period of not less than 60 months (5 years) or
- Has continued for a constant period of not less than 60 months
Note: Unfortunately for some people receiving disability benefits from the Social Security Administration (SSA), the DOE's definition of a total and permanent disability is not the same as the SSA's definition.
Once the DOE approves your application, you will get a 3-year conditional discharge, and all collection efforts should stop. You will then be placed on a three year reinstatement period.
During those three years, the DOE, through its contractor, Nelnet, will check to see if you are earning more than the allowable income during the three year reinstatement period. This means that, if you earn more than 100% of the poverty level for a family of 2, your loan will be reinstated and you will have to start making payments. If your health does not get better during those three years, then you can get a final discharge of the student loan.
You will not be able to take out a new federal student loan until you sign a statement of understanding. This means that any new loan you get is not dischargeable based on your current disability unless it gets a lot worse and a doctor has certified that you can work.
If your application for a disability discharge is denied, you have the right to appeal that decision.
Veterans qualify for disability discharge if the Department of Veterans Affairs (VA) has made a decides that the veteran is unemployable due to a service-related condition or disability. If the VA has determined that you are disabled, then you do not need to provide the loan holder with a physician's certification of disability or medical records.
If the school you were going to closed, or if you left your school within 90 days of its closing, you may be able to get a closed school discharge. The 90 day period may be extended under exceptional circumstances.
To find out the official date of a school's closing, contact the DOE. If a student loan is discharged under the closed school provision, the loan will be canceled, and you can get a refund of all payments you have already made on this loan, including any tax refunds that the government has intercepted.
You must apply to the lender or agency holding the loan to qualify for discharge based on school closure. The application is available on the DOE's Information for Financial Aid Professionals (IFAP) website.
Discharge is available when a school falsely says that a student would benefit from a certain program. This can happen when the school was required to give a test to see if the borrower would benefit from the education program, and the test was not given properly or not approved by the DOE.
False certification also happens when a school accepts a student who cannot meet the employment requirements for the profession that the student is being trained for, or where the student has a criminal record that would prohibit her from obtaining the necessary licensure to practice the profession she is being trained for.
You must file an application for discharge for discharge based on false certification of ability to benefit to request a review. See the NCLC's Student Loan Borrower Assistance website for more information about this defense.
Identity theft or unauthorized payment
If your signature was forged on either your loan application or a loan check, you might be able to get your loan discharged. Ask the holder of your loan for a false certification discharge application.
Learn more about Disputing the terms and amount of a student loan.
If you enrolled in a school, but never attended, or withdrew early enough to get a refund, but no refund was given to you, you may be able to get a full or partial loan cancellation equal to the amount that should have been refunded to you by the school. Get an application from the holder of the loan.
You also are required, within 120 days from the date you apply, to try to solve the problem with the school, if it is still open.
Discharge is available to borrowers with FFEL or Direct Loans, but borrowers must apply for discharge based on an unpaid refund.
Updated: June 2017