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Loan Dispute and Disharge

A loan discharge releases you from all or a portion of your student loan debt obligation. In certain circumstances, if you have loans through the Federal Family Education Loan Program (FFELP), the Direct Loan program (DL) or, in some cases, the federal Perkins loan program, you may be eligible for a federal student loan discharge.

There are several circumstances in which your federal student loan debt may be discharged or forgiven:

Teacher Loan Forgiveness

Teacher Loan Forgiveness encourages entering and continuing in the teaching profession by forgiving a portion of student loans after 5 years of teaching (or sooner, for Perkins loans).

In order to qualify for Teacher Loan Forgiveness:

  • You must have been teaching full time for 5 consecutive years at an eligible low-income school or eligible location operated by an educational service agency. For a list of eligible schools, check the U.S. Department of Education’s Teacher Cancellation Low Income Directory.

  • You cannot have an outstanding balance on a Federal Family Education Loan Program (FFELP) or Direct Loan (DL) program loan as of October 1, 1998, or on the date you obtained a FFELP or DL loan after October 1, 1998.

If you meet the above criteria, you may be eligible for this forgiveness depending on when you began teaching and the type of teaching you do. Any loan you are looking to have forgiven must be made before you complete your 5 years of qualifying teaching service.

Borrowers Who Began Teaching Before October 30, 2004

You may be eligible for forgiveness of up to $5,000 if:

  • You are a full-time elementary school teacher and demonstrate knowledge in reading, writing, mathematics, and other areas of the elementary school curriculum.
  • You are a full-time secondary school teacher in a subject area relevant to your major.

You may be eligible for forgiveness of up to $17,500 if:

  • You are teaching as a highly qualified full-time mathematics or science teacher in a qualifying secondary school or as a highly qualified special education teacher.

Borrowers Who Began Teaching After October 30, 2004

You may be eligible for forgiveness of either:

  • Up to $5,000 for teaching as a highly qualified, full-time teacher in an eligible elementary or secondary school.
  • Up to $17,500 for teaching as a highly qualified special education teacher or a highly qualified full-time mathematics or science teacher in an eligible secondary school.

Note that you can combine your full-time service at qualifying elementary and secondary schools to meet the 5-year requirement period.

If you think you qualify, fill out a Teacher Loan Forgiveness Application (pdf, 0.08 MB), then contact your servicer.

You may also wish to use Teacher Loan Forgiveness Forbearance (pdf, 0.09 MB), which lets you postpone payments while you are completing the teaching requirement.

Borrowers With Perkins Loans

If you have Perkins loans and meet the state requirements, you may qualify for the following:

  • Up to 100% of your Perkins loans can be forgiven.
    • 15% per year for the first 2 years.
    • 20% for years 3 and 4.
    • 30% for year 5.
  • The forgiveness covers all accrued interest for all 5 years.

You may also qualify for a deferment during this 5-year time period. To find out if you meet the requirements for Teacher Loan Forgiveness, contact the school that holds your loan.

 

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Public Service Professions

If you work for certain public service or nonprofit employers, you may be eligible to have your remaining balance forgiven. 

Public Service Loan Forgiveness encourages public service careers by forgiving the balance of borrowers’ loans after they make 120 qualifying payments in no less than 10 years.

Qualifications for this program include the following:

  • You must be employed full time with an eligible public service or nonprofit employer.
  • Forgiveness will only be granted while you are still employed full time with the eligible employer.
  • You must make 120 eligible monthly payments on or after October 1, 2007, while employed full time with an eligible employer.
  • Your payments must be made under one of the these payment plans: Standard repayment, Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income-Contingent Repayment (ICR). 

Keep in mind, the standard repayment schedule works by splitting your loan amount into 120 equal payments (or 12 payments per year for 10 years). So, after making 120 payments, you may not have a balance left to be forgiven unless you are making reduced payments under one of the income-driven repayment plans. If you qualify for forgiveness, the forgiven balance is not taxable.

Eligible Loans

Only non-defaulted loans made under DL are eligible for Public Service Loan Forgiveness. DL loans include the following:

  • Direct Stafford loans
  • Direct Unsubsidized Stafford loans
  • Direct PLUS loans
  • Direct Consolidation loans

Payments you have made under FFELP are not eligible. If you have FFELP loans, you can gain eligibility by consolidating your loans into DL.

You can keep track of your eligible employment and loan payments with this employment certification form (pdf, 0.22 MB) and get more details about this program from the U.S. Department of Education.

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Death

If you (or the student in the case of a Parent PLUS loan) die, the federal student loan will be discharged.

To apply, send notification of death to the loan holder. Collection activity will be put on hold for 60 days after the loan holder receives notification of the death. An original or certified copy of the death certificate (or a photocopy) must be sent to all of the borrower’s loan holders to discharge the loan(s). Perkins loans are also eligible for this discharge.

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Bankruptcy

Student loans are difficult to discharge through bankruptcy, but it can be done.

In some circumstances you may be eligible for a federal student loan discharge if you file for bankruptcy. The bankruptcy court would have to rule that repaying your federal student loan debt would cause you an undue hardship.

Perkins loans are also eligible for this discharge. To apply, contact a qualified bankruptcy attorney and, once filed, provide all loan holders with the Notice of First Meeting of Creditors. The loan will be placed on hold until the bankruptcy proceedings have concluded.

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Closed School

If you (or the student in the case of a Parent PLUS loan) could not complete your program of study because your school closed while you attended or you withdrew within 120 days of the school closing, your federal student loans may be eligible to be discharged.

This is only available for loans received on or after January 1, 1986.

In addition, the entire school or location must close. You would not be eligible if the school terminated your program. You would not be eligible for a school closure discharge if you continue a similar program of study at another school through a teach-out program, by transferring your credits from the closed school to another school, or by benefiting from the training provided by the closed school.

Perkins loans are also eligible for this discharge. To apply, complete the School Closure Loan Discharge Application (pdf, 0.06 MB) and submit it to your loan holder.

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False Certification of Ability to Benefit

If your school admitted you even though you did not meet the requirements of admission and you did not have the ability to benefit from its training, you (or the student in the case of a Parent PLUS loan) may be eligible for a loan discharge.

For example, if you had not received a high school diploma or GED before your admission and receipt of federal aid, you might qualify for this discharge. Loans made before January 1, 1986 and all Perkins loans are ineligible for this discharge.

To apply, complete the False Certification of Ability to Benefit Loan Discharge Application (pdf, 0.06 MB) and submit it to your loan holder.

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Disqualifying Status

If you (or the student in the case of a Parent PLUS loan) were unable to meet the state’s legal requirements for employment in the occupation in which you studied at the time you received your federal student loans, you may be eligible for a loan discharge.

Loans made prior to January 1, 1986 and all Perkins loans are ineligible for this discharge. To apply, complete the False Certification Disqualifying Status Form (pdf, 0.06 MB) and submit it to your loan holder. You must provide the loan holder your state’s legal requirements for employment that you could not meet, as well as documentation proving that you had this disqualifying status when you received your loan.

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Your School or Another Person Falsely Signed Your Name

If your school falsely signed your name to take out student loans, or if another person borrowed in your name without your knowledge and without benefitting you, you could be eligible for these programs.

If your school falsely signed your name

If your (or the student’s in the case of a Parent PLUS loan) school falsely signed your name on the loan application or promissory note without your permission, you may be eligible for a loan discharge. Such a request for discharge may be denied if you received benefit or use of the proceeds of the loan.

Perkins loans and all loans made prior to January 1, 1986 are excluded from this discharge.

To apply, complete the False Certification: Unauthorized Signature form (pdf, 0.06 MB) and submit it to your loan holder.

Other Forms of Identity Theft

If you are a victim of identity theft and someone was convicted of borrowing a federal student loan under your name, you may be eligible to have the loan discharged.

To apply, complete the same False Certification Unauthorized Signature Form (pdf, 0.06 MB) and submit it to your loan holder. You must certify that you did not authorize the loan, willingly receive or benefit from the loan, and provide the loan holder a copy of the court verdict or judgment stating that you were the victim of identity theft by the person named.

Perkins loans and all loans made before January 1, 2006 are ineligible for this discharge.

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Unpaid Refund

You (or the student in the case of a Parent PLUS loan) may be eligible to have a portion or all of your federal student loan discharged if your school did not make a required return of your loan funds to your loan holder.

This discharge is not available for Perkins loans or loans made before January 1, 1986. The discharge would only be for the amount that should have been returned and was not.

To apply, complete the Unpaid Refund Loan Discharge Application pdf, 0.1 MB) and submit it to your loan holder. You may need to provide proof showing that your loan should have been refunded to your loan holder.

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Additional Benefits for Perkins Loans

In addition to the Teacher Loan Forgiveness benefits listed above, Perkins loan borrowers may be able to have a portion or their entire loan balance forgiven if they work in one of these categories:

  • Teacher, Speech Pathologist, or Librarian at a Title I-Eligible School
  • Nurse or Medical Technician
  • Child or Family Services
  • Early Intervention
  • Head Start
  • Law Enforcement or Correction Officer
  • Military Service (active duty)
  • Public Service (Such as Public Defender)
  • Pre-Kindergarten or Childcare
  • Firefighter
  • Volunteer Service

Perkins loans generally get cancellations; a portion of the loan and interest are forgiven for each year you are eligible. In order to qualify for cancellation, you must apply as soon as you are eligible. If you were eligible in the past but did not apply, that portion of your debt cannot be canceled. To apply, contact your school.

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Disputes

If you believe there is a problem with your loan or dispute the information provided by your loan holder and you have tried to resolve the dispute but are still not satisfied, you may need to contact the Federal Student Aid (FSA) Ombudsman of the US Department of Education. The Ombudsman group is a neutral, informal, and confidential resource to help resolve disputes about your federal student loans. You should only contact the Ombudsman as a last resort.

The Ombudsman can help you:

  • resolve discrepancies about loan balances;
  • explain loan interest and collection charges;
  • identify options for resolving issues related to consolidation, service quality, default status, bankruptcy, tax offsets, and other concerns;
  • clarify loan deferment, forbearance, discharge, and forgiveness requirements; and
  • identify loan repayment options.

They do not:

  • automatically take your side;
  • make binding decisions or overturn decisions by your loan holder;
  • work with you on private student loan or grant complaints, or issues that have already gone to the Department of Education for formal or legal investigations;
  • accept loan payments or process deferment, forbearance, discharge, or forgiveness requests;
  • replace regular channels of problem resolution with the Department of Education; and
  • testify or serve as a witness.

You can contact the Ombudsman group at 877.557.2575 or by fax at 202.275.0549. You can also mail complaints to:

US Department of Education
FSA Ombudsman Group
830 First Street, N.E., Mail Stop 5144
Washington DC, 20202-5144

We Are on Your Side

Not sure who to contact about your eligibility for a discharge? Start with ASA. Our Borrower Advocacy team specializes in dispute resolution. Also, when needed, our VP-level ombudsman can personally work with you to resolve difficulties surrounding your loan.

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Total and Permanent Disabililty

If you’re unable to work due to injury or illness, you may be eligible to have your federal student loans discharged. If eligible, this means you wouldn’t be responsible for any further payments.

There are 3 ways to qualify for total and permanent disability discharge:

  • Doctor Certification: A doctor must certify that you are unable to engage in any substantial gainful activity due to a medical condition that:
    • Can be expected to result in death, or
    • Has lasted for a continuous period of no less than 60 months, or
    • Is expected to last for a continuous period of no less than 60 months.
  • Veteran Affairs Certification: The Secretary of Veteran Affairs (VA) must certify that you cannot work because of a service-connected disability.
  • Social Security Benefits: As of July 1, 2013, if you receive Social Security Disability Income (SSDI) or Social Security Income (SSI) and the Social Security Administration (SSA) will review your benefit eligibility every five to seven years.

Note: The third item applies only to applications filed on or after July 1, 2013.

All federal Stafford, PLUS, Perkins, and Consolidation loans are eligible. Your loan responsibility if you are a co-signer or endorser on any PLUS or Consolidation loans would be dischargeable as well. To apply, go to DisabilityDischarge.com. The site has additional information about how to fill out this form and how the discharge process works.

Once you begin the application process, you will automatically be placed in forbearance for 120 days. During that time, no payments are due.

If your doctor is certifying your application, your doctor will have to fill out Section 4 of the form. Once your doctor has filled out Section 4, you must finish submitting the form within 90 days.

If you are a disabled veteran or receive SSA benefits, you can provide a copy of your VA disability paperwork or SSA award instead of the doctor’s portion of this form. You still need to fill out the other parts, though.

Be sure you fill the form out carefully and completely, because it cannot be processed if it is not complete.

Once you and/or your doctor have completed the form, submit it to:
US Department of Education
PO Box 87130
Lincoln, NE 68501

Your application will be handled by Nelnet, which has been designated to process all TPD applications. No payments are due while the application is being reviewed.

Post-Monitoring Period:

If you qualify by doctor certification or SSA award, you will be placed in a three year post-monitoring period after your application is approved. Your loan can be reinstated during this period if you:

  • Receive a new federal student loan or TEACH Grant.
  • Earn more income than 100% of the federal poverty guideline based on a family of 2.
  • Don’t return any federal student loan or TEACH Grant disbursements made to you after the doctor’s certification.
  • Receive a notice from the SSA saying that you are no longer disabled.
  • Receive notice that your disability review will no longer be every 5 to 7 years.

Veteran applicants don’t have a post-monitoring period.

Frequently Asked Questions about Total and Permanent Disability Discharge

Q. I applied for TPD discharge before July 1, 2013 but haven’t heard back yet. Who should I contact?
A. Applications received prior to July 1, 2013 will be reviewed and processed by the loan holder, which could be your lender or guaranty agency or Direct Loan servicer. For updates, you should contact whomever you sent your TPD application to initially.

Q. I applied for TPD discharge in the past but was denied. Can I apply again now that Social Security Disability is considered a qualifying status?
A. Yes. Borrowers may reapply for TPD discharge anytime new information becomes available about their disability. New regulations allowing TPD discharge due to some SS disability status’ falls in this category.

Q. Where do I obtain a TPD application?
A. DisabilityDischarge.com.

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Disaster Relief

If you live in a federally declared disaster area, you may be eligible for relief that would temporarily suspend your federal student loan payments.

To see if your area has been declared as a disaster area, check the Federal Emergency Management Agency’s website.

Requesting Disaster Relief

For non-defaulted borrowers, both Direct Loans and Federal Family Education Loans will grant a three-month administrative forbearance and provide you a notice allowing you to decline the forbearance if you were not affected by the disaster. You do not need to notify the loan holder unless the holder does not have your current address.

For defaulted borrowers, you, a member of your family or another reliable source must contact the loan holder to let them know that you live in a designated disaster area and were affected by the disaster. Collection activities will stop for three months after this notification has been received.

Contact your loan holder to request relief. All borrowers can also contact the Federal Student Aid Ombudsman at 877.557.2575 or 202.275.0549 for assistance.

If you don’t know who holds your loans, you can find details on all of your federal student loans using the U.S. Department of Education’s National Student Loan Data System (NSLDS).

Receiving Disaster Relief

Receiving disaster relief will postpone your payments—but the type of postponement depends on whether you’re in school or in repayment.

If you are attending school and postponing your payments with an in-school deferment:

  • You can continue using this deferment—regardless of your actual enrollment status—during your period of disaster-related nonattendance.
  • You will keep an in-school enrollment status until you withdraw or re-enroll during the next regular enrollment period.
  • If you do not enroll at the next enrollment period’s start date, your loans will be put into repayment as of that date.
  • Upon entering repayment, you will receive a grace period —provided you haven’t previously used this time up.

If you are currently repaying your loans:

  • Your loan holder can grant you forbearance for up to 3 months.
  • During this time, your payments will not be due—but interest will continue to accrue on your loans.
  • Your loan holder does not need to obtain supporting documentation or a signed written agreement from you to grant you forbearance.
  • You can request forbearance over the phone or in writing.

Find out more about deferment and forbearance. If you have additional questions about disaster relief, please contact American Student Assistance® (ASA) or visit the Federal Student Aid website.

 

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