First the bad news, most borrowers should expect to repay their student loans as agreed. With that said, there are many student loan repayment, discharge and forgiveness programs out there. Over time, we plan on having a comprehensive list, but for now, we’ll just talk about the most common programs.
Student loan forgiveness tends to fall into two categories: rewards because you did something good and relief because something bad happened to you. We’ll start with the “good news” programs which are:
- Public Service Loan Forgiveness
- Teacher Loan Forgiveness
- Department of Defense Loan repayment
- Americorps and Peace Corps Loan repayment
- Perkins Loan Forgiveness
Other Forgiveness Programs
Income Driven Repayment Plans
There are also many state programs that offer loan repayment, mostly for working in certain fields such as nursing and veteran assistance. Some of these programs will even forgive private student loans. We intend on filling in our own list, but in the meantime, here’s one we like.
Just like Federal Direct Loan and FFELP borrowers, Federal Perkins Loan borrowers may have their loans cancelled if they die, become totally and permanently disabled (TPD), are unable to complete their program of study because the school for which they borrowed the Perkins Loan closes while they are enrolled at the school (or within 120 days of the date the school closes), and if a bankruptcy court determines that repayment of the Perkins Loan would represent an undue hardship for the borrower. Perkins borrowers use the same standardized application used by Direct and FFELP borrowers to apply for the TPD and Closed School cancellations. See the discussion of these cancellations/discharges under the Direct Loan discussion. A borrower seeking to cancel a loan in bankruptcy must be able to demonstrate to the school that the court has determined that repayment of the loan would represent an undue hardship for the borrower.
Sometimes bad things happen to good people. Thankfully, there are often remedies for these things for borrowers of federal student loans. For the most part, student loan discharges are for situations where the loan should not have been made in the first place or for when something terrible happens, such as the death or disability of the borrower. Below are the requirements for the discharges that are currently available. You should note that in several of these cases, the discharged amount is taxed as income.