Student Aid on the Web Skip Navigation

Discharge/Cancellation

It's possible to have your student loan debt discharged (canceled) or reduced, but only under certain specific circumstances:

  • You die or become totally and permanently disabled.
  • Your school closed before you could complete your program.
  • For FFELSM and Direct Stafford Loans only: Your school owes your lender a refund, forged your signature on a promissory note, or certified your loan even though you didn't have the ability to benefit from the coursework.
  • You work in certain designated public school service professions (including teaching in a low-income school).
  • You file for bankruptcy. (This cancellation is rare and occurs only if a bankruptcy court rules that repayment would cause undue hardship.)

Effective July 1, 2006, a false certification discharge was created authorizing a discharge if the borrower's loan was falsely certified as a result of a crime of identity theft. Until the discharge regulations can be developed, lenders may provide administrative forbearance and guaranty agencies may suspend default collections if a borrower presents evidence showing that the borrower's loan may have been falsely certified as a result of a crime of identity theft. The lender or guaranty agency must believe the evidence is reasonably persuasive.

Discharge provisions differ depending on whether you have a Federal Perkins Loan or a FFEL/Direct Stafford Loan. For an overview of discharge provisions, click here. For more specifics on discharges, scroll down this page.

For information on teaching service discharges, click here.

Note that you can't cancel a federal student loan because you're having some financial difficulty, unless you qualify for a bankruptcy discharge.


Applying For a Discharge

If you qualify for a loan discharge, you must apply for one:

  • Federal Perkins Loan borrowers must apply to the school that made the loan or to the loan servicer the school has designated.
  • Direct, FFEL, and PLUS Loan borrowers should contact your loan servicer.

If you're not sure what type of loan you have or who your servicer is, you can view your loan information at www.nslds.ed.gov.


Making Payments On Your Loan While Your Discharge Application is Reviewed

Until you hear whether your discharge has been approved, you should continue making payments on your loan to prevent it from going into default or accruing (accumulating) additional interest. However,

  • if you have a FFEL or Direct Stafford Loan, you can be granted forbearance. The holder of your Stafford Loan should grant forbearance until a decision is made on your application. If forbearance is granted, no one is permitted to collect on your loan until the holder of your promissory note determines whether you are eligible for a loan discharge.
  • if you have a Federal Perkins Loan, schools must automatically defer your loans if you are performing service that will qualify you for loan cancellation (such as teaching in a low-income school). You don't need to apply for this deferment. Schools may grant such a deferment for up to 12 months at a time.


Approval of a Loan Discharge

If you qualify for a complete discharge of your loan, you are no longer obligated to make loan payments. Depending on the type of loan discharge program you may be eligible for, the holder of the loan may be required to refund to you some or all of the monies you paid on the loan. In addition, the loan holder may be required to delete any adverse credit record related to a default, and no tax refund offset or wage garnishment will take place to collect on the discharged loan. If the loan was in default, the discharge may erase the default status. If you have no other defaulted loans, you regain eligibility for federal student financial assistance. Your loan holder can answer any questions you may have regarding your eligibility for a refund.

Note: In some cases, your school might be required to refund a portion of a FFEL or Direct Loan to your lender (for example, you withdrew from school within a timeframe that required a refund of loan monies). If your school fails to make that refund, that portion of your loan will be canceled, but you will be responsible for paying any remaining amount. (See "School-Related Discharges" below.)


Denial of Loan Discharge

For most all discharges, the holder of your loan makes the final decision on whether to discharge the loan—you cannot appeal the decision to the U.S. Department of Education. The two exceptions are false certification and forged signature discharges for a FFEL or Direct Stafford Loan (see "School-Related Discharges" below). If you receive these types of discharges, you may ask the Department to review the denial.

If your loan discharge is denied, you remain responsible for repaying the loan. Talk to your loan holder about repayment options if you have a FFEL or Direct Stafford Loan. Check out repayment options by reading the Loan Repayment section of Funding Education Beyond High School: The Guide to Federal Student Aid.

If your loan is in default, ask about loan rehabilitation and loan consolidation. Also, see our Guide to Defaulted Student Loans for more information.

If your school has closed, you should also explore the following options if your discharge application is denied:

  • Contact the state licensing agency and ask if there is a tuition recovery fund or performance bond that will cover your damages based on the school closure.
  • If the school filed bankruptcy, you should file a claim for your loss in the bankruptcy proceeding. You also might want to consult an attorney about any options you may have through the court system.


Death Discharge

Cancellation because of the borrower's death (or, in the case of PLUS Loans, the death of the student for whom the parent borrowed) is based on an original or certified copy of the death certificate submitted to the school (for a Federal Perkins Loan) or to the holder of the loan (for a FFEL or Direct Stafford Loan).


Total and Permanent Disability Discharge (TPD)

If a borrower is unable to work and earn money because of an injury or illness that is expected to continue indefinitely or result in death, the borrower may apply for a TPD discharge of your FFEL Loans, Federal Perkins Loans, Federal Direct Loans, or TEACH Grant service obligation.

For more information on qualifying for this discharge, click here.


School-Related Discharges

  • Your school closed . . .
    If your school closes while you're enrolled, and you can't complete your program because of the closure, any U.S. Department of Education loan obtained to pay your cost of attendance at that school can be discharged. If you were on an approved leave of absence, you are considered to have been enrolled at the school. If your school closed within 90 days after you withdrew, you are also considered eligible for the discharge. However, your loan cannot be cancelled because of personal circumstances that caused you to withdraw more than 90 days before the school closed.

    Please bear in mind that you are not eligible for the discharge if you are completing a comparable educational program at another school. If you complete such a program at another school after your loan is discharged, you might have to pay back the amount of the discharge. If you haven't received a diploma or certificate but have completed all the coursework for the program, you're not eligible for the discharge.

    For answers to questions about your closed school, call the appropriate person on our list of Closed School Customer Service Contacts.

    If the holder of your loan learns your school closed, your loan holder will send you a loan discharge application. If you don't receive an application, contact the loan holder (see contact information above).

    Getting your financial aid and academic records if your school closes.
    Contact the state licensing agency in the state in which the school was located to ask whether the state made arrangements to store the records. The records might be useful in substantiating your claim for a loan discharge. For more information, please click here.

    You might need your academic records if you plan to attend another school and want to have your coursework at the closed school taken into consideration. If you're applying for aid at the new school, it can check the Financial Aid History information included either on the Student Aid Report (SAR) you received or in the electronic record the school receives. If you're transferring in the middle of the year, your new school must check your information in the National Student Loan Data SystemSM (NSLDSSM).

The following three school-related discharges apply to FFEL and Direct Stafford Loans only.

  • You didn't have the "ability to benefit" from the coursework (false certification) ...
    A Stafford Loan can be discharged if the school admitted you based on your ability to benefit from the training, but you weren't properly tested to measure that ability, or you failed the test. You might also be eligible for this type of discharge if you did not meet the physical or legal requirements of your state to enroll in the program or to work in the career for which you were training, regardless of whether you had a high school diploma or General Education Development (GED) certificate.If you had a high school diploma or GED when you enrolled in the program, you're ineligible for this discharge because those documents are sufficient to establish your ability to benefit from further training after high school. You may not be eligible for a discharge if you received a GED before you completed your program of study at the college or career school, or you completed a developmental or remedial program at the school.

  • Your signature was forged on the loan documents ...
    If you believe someone forged your signature on your FFEL or Direct Loan promissory note or authorization for electronic fund transfer, you must attach five different samples of your signature to your application for the loan discharge. At least two of the samples must be on documents that are clearly dated within a year before or after the date of the contested signature. You may not be eligible if the loan was used to pay your school charges for the portion of the program of study you completed (whether the payment was by a credit to your account or by cash or check).

  • The school owes your lender a refund ...
    You might qualify for partial discharge of a FFEL or Direct Loan if your school failed to pay your lender a refund required under federal law. Only the amount of the unpaid refund will be discharged. You may qualify for this partial discharge whether the school is closed or opened. Contact your loan holder for more information.

Note that your loan cannot be discharged because you weren't satisfied with the school's services. Your loan can't be discharged solely because you believe the school

  • provided poor training or had unqualified instructors or inadequate equipment,
  • did not provide job placement or other services that it promised, or
  • engaged in fraudulent activities (other than falsely certifying the loan).

Also, a loan discharge can’t be granted because you attended an ineligible program of study offered by the school. The state licensing and accrediting agencies for the school are responsible for the quality of educational services the school provides. The U.S. Department of Education does not endorse the school's educational programs or guarantee the school will deliver the services for which a student contracted.

Last updated/reviewed October 13, 2010

End of Page