Applying for a Student Loan Cancellation

A student loan cancellation can not only wipe out the remaining balance of your federal student loan debt, but can also mean getting money back on loan payments.  Cancellations are very loan specific, but if you qualify, applying to cancel your student loan can yield significant financial benefits.

What Is Loan Cancellation?

Student loan cancellation means your debt from a federal student loan is erased, also referred to as “loan discharge.” The application process begins at the school's student financial aid office and is evaluated by the staff of the government loan program. The program cancellations are available to:

  • Perkins Loans
  • Stafford Loans
  • PLUS Loan
  • FFEL

It is also very important to note that the loan debt can be cancelled in whole or part and can include reimbursement of prior payments.

Determining Eligibility

Economic hardship is not a valid ground for student loan cancellation. Even in a bankruptcy, a student loan is rarely discharged. Economic hardship, does however, qualify a student to defer loan payments.   The following is a list of valid reasons for cancellation:

  • Death
  • Permanent total disability
  • Total, but temporary, disability
  • School closure, if attending a trade school that closes while you are attending
  • Fraud, meaning someone forged your name on the application

Earning Your Cancellation

Even if you don’t meet the criteria above, you can still get a student loan cancelled, depending on your loan program, by working in certain career fields. Depending on the career field, the length of time you work, where you work and what loan program you have, you can apply for full or partial cancellation. These career fields include:

Teaching - Teachers working in designated areas of economic hardship and working with disabled children can apply. For some programs you must teach a given number of years, up to five years, to receive cancellation. Teachers can work full time, part time and in private schools.

Health Care - Includes doctors, residents and nurses

Community Service - This includes the Peace Corps, AmeriCorps, and working locally with the elderly, disabled or distressed.

Law Enforcement 

Military Service

Filing Your Application

If you are eligible for cancellation, the application, which can be obtained from your school financial aid office and online, will require supporting documentation. At a minimum, be prepared to provide your personal information, the dates you attended (or are attending) school, the reason for the cancellation request and the verification that your reasons meet the eligibility requirements.

Assessing Your Results

If your cancellation request is approved, it is important to take necessary follow-up steps. If the cancellation is a partial cancellation, you are required to repay the uncanceled amount. If you receive full cancellation, determine if that also includes reimbursement of previous payments. A cancellation of the loan should also eliminate record of default from your credit history. Follow up with your lender to get the full benefits.

Other Options

If you are not eligible for student loan cancellation or your application is denied, you have other options. You can apply for deferring or reducing payments and financial hardship is taken into account when applying for these types of programs.

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