Student Loan Discharge: Options to Cancel Your Student Loans
If you qualify for student loan discharge, the government or your private student loan company will cancel the remaining balance of your loan. You must meet very specific criteria to get your loans discharged, but for the right borrowers, the effort may be worth it.
Below you’ll find nine ways you could obtain student loan discharge — take a look to see if any apply to you.
On this page:
- 1. Closed school discharge
- 2. Discharge in bankruptcy
- 3. Discharge for total and permanent disability
- 4. Discharge for false certification or unauthorized signature
- 5. Discharge for identity theft
- 6. Discharge for disqualifying status
- 7. Discharge for unpaid refund
- 8. Borrower defense discharge
- 9. Discharge due to death
- Frequently asked questions
1. Closed school discharge
If your school closes while you’re enrolled or shortly after you withdraw, your federal student loans could be discharged. Typically, you must have been enrolled during or within 180 days of the school closing (or 120 days, if your loan was disbursed before July 1, 2020).
If you find yourself in this situation, you’ll have the challenge of tracking down your academic and financial records. Because the college is defunct, you may need to contact the state educational authority for more information.
You’ll also need to fill out a student loan discharge application, and be sure to keep in touch with your loan servicer throughout the process.
2. Discharge in bankruptcy
Unlike other types of debt, the courts rarely discharge student loans through bankruptcy. But in extreme cases of “undue hardship,” declaring bankruptcy will wipe out some or all of your student debt. There’s no hard-and-fast rule for what constitutes undue hardship, but there are a few general guidelines:
- You’ve made good faith efforts to pay back the loan.
- If you had to pay back the loan, you couldn’t sustain a minimal standard of living.
- Your financial hardship is going to continue for the foreseeable future.
Filing for bankruptcy isn’t a decision to take lightly. The process can be costly, lengthy and it will more than likely tank your credit. Since student loan debt isn’t automatically included under a bankruptcy filing, you may also need to hire a specialized student loan lawyer.
If you have insurmountable debt outside of student loans, then bankruptcy could make sense. Otherwise, consider whether this path is worth the battle. Another option, such as an income-based repayment plan could offer more immediate relief.
What to know about bankruptcy and private student loans
In some cases, private student loans are easier to discharge through bankruptcy than federal student loans.
You might not need to prove undue hardship if your private student loan:
- Provided a loan amount that exceeded your school’s cost of attendance
- Provided funds to attend an unaccredited college, trade school or an overseas college
- Paid for living expenses and associated costs while studying for a professional exam
- Covered fees and living expenses while you were in medical or dental school
- Was issued while you attended college less than half time
3. Discharge for total and permanent disability
You could be eligible for disability discharge if you’re facing a long-term illness or condition that leaves you unable to work. For federal student loan borrowers, this is called Total and Permanent Disability Discharge (TPD).
If you have federal student loans, there are three ways your can qualify for TPD:
- You’re a veteran with a service-related disability who can no longer work. You must submit documents from the U.S. Department of Veterans Affairs (VA).
- You receive Social Security Disability Insurance or Supplemental Security Income benefits. You must submit supporting documentation and have a disability review scheduled within the next five to seven years.
- Your physician determines that you have a total and permanent disability that has lasted for at least 60 months, will last for at least another 60 and could result in death.
If you qualify for TPD, the government will automatically discharge your loans through data from the Social Security Administration.
If you think you qualify for TPD and your federal student loans haven’t been automatically discharged, contact the loan servicer Nelnet. Nelnet will provide you with the information you need for your application and it will tell your loan servicers to pause collection for 120 days while it makes a determination on your case.
If you have private student loans, your options may be limited as not all lenders offer this benefit. If yours does, you may have different criteria to meet than those listed above. You’ll need to contact your lender for more information.
4. Discharge for false certification or unauthorized signature
If you have an FFEL or Direct loan and a school official forged your signature on your loan check, loan application, electronic funds transfer or Master Promissory Note, you could get your loan discharged for false certification or unauthorized signature.
You will need to complete a loan discharge form related to the unauthorized signature or unauthorized payment. You should also contact your loan servicer for more information.
5. Discharge for identity theft
Student loan identity theft can be devastating, but thankfully such fraudulent loans are dischargeable. If a scammer took out FFEL or Direct loans in your name, contact the Department of Education Office of the Inspector General at 1-800-647-8733.
During this process, you will fill out an identity theft student loan discharge application as well as provide proof of the identity theft, such as a police report.
6. Discharge for disqualifying status
Incidents on your criminal record could stop you from pursuing certain professions. For instance, you might not be able to be a teacher if you have a felony drug conviction. But if your school knew that your criminal record would stop you from getting your teaching certificate and certified your loans anyways, you could get those loans discharged.
To pursue this option, complete the disqualifying status discharge form and contact your loan servicer.
7. Discharge for unpaid refund
If you drop out of college before completing 60% of the school period that your loan was intended to cover, your school should automatically adjust your loan balance based on how long you attended.
Additionally, colleges typically have a window of time called the “withdrawal period,” allowing students to unenroll with no financial impact or penalty.
If either of these scenarios applies to you, and your school did not adjust your federal student loan balance, you could qualify for discharge after completing the unpaid refund form.
Note that the discharge will only apply to the portion of your loan that should not have been charged in the first place.
8. Borrower defense discharge
Another way to qualify for student loan discharge is if your college violated state laws. Some schools have been found to have used illegal or deceptive tactics to convince students to take out loans and attend.
If you can prove a school defrauded you, you won’t have to pay back your student loans. You must prove the misleading conduct directly related to your loans or education. Documents like transcripts, enrollment agreements, emails with school officials, promotional materials and course catalogs may all be useful in supporting your claim.
You can put your loans into forbearance or stop collections when you apply for a borrower defense discharge. If your application is approved, you won’t have to pay the loans back. But if it is denied, you’ll have to pay back the loans and the interest accrued while in forbearance.
Note that the borrower defense discharge process can be quite involved. To learn more, visit studentaid.gov.
9. Discharge due to death
Federal student loans are discharged if the borrower dies. A family member or representative must send a death certificate or other documentation to the loan servicer. Parent PLUS loans are also canceled if the borrower or the student passes away.
Private student loans are another matter. Some lenders offer a death discharge, and some don’t. If yours doesn’t, it can collect what you owe from your estate. Check your promissory note or contact your lender to learn more.
Frequently asked questions
It’s complicated. The Tax Cuts and Jobs Act of 2017 prohibits student loans that were discharged for total and permanent disability or death from being taxed. However, this only applies to loans taken out on or after January 2018. The act is set to expire in 2025.
The American Rescue Plan excludes federal student loan discharges from being taxed (federally) through Dec. 31, 2025. You may, however, still owe state income tax on the discharge. Private student loan discharge may also be taxable.
No. Student loan forgiveness usually applies to federal loan borrowers working for a nonprofit or those on certain repayment plans. For instance, public school teachers could have their student loan balance forgiven after 10 years of qualifying payments through Public Service Loan Forgiveness (PSLF).
Student loan discharge, on the other hand, is geared toward borrowers who were defrauded in some way or are unable to pay because of disability, bankruptcy or death.
It depends. Credit scores are calculated using several factors, one of which is your payment history. Late student loan payments may be removed after discharge, but not always.
For example, if your loan is discharged due to borrower defense, late payments are removed from your credit report. This isn’t the case if your loan is discharged through bankruptcy.
Additionally, if your student loan is one of your oldest open accounts, closing it (or in this case, discharging it) could cause a temporary dip in your credit score. Still, a small and short-lived decrease in your credit score is probably worth the savings student loan discharge can provide.