Student Loan Forgiveness in the News Again: New Payment Extension

Federal student loan forgiveness has been in the news again due to the most recent payment extension. Student loans were set to resume payments on May 1st, but the Department of Education issued another stay, pushing commencement out until August 31, 2022. Recent results of a poll surveying 23,000 current loan holders stated that 93% of borrowers were not financially ready to begin payment.

In addition, before the CARES Act pause a rough estimate put a quarter of borrowers, or 10 million people, to be in delinquency or default. While 100,000 individuals have been identified so far by the Department of Education as being eligible through the Limited PSLF Waiver to have their federal student loans forgiven, there are still millions of borrowers with outstanding federal student loan debt.

Today, about 43 million adults in the United States collectively hold $1.5 trillion in federal student loan debt and an additional $119 billion in private student loans not backed by the federal government. In certain situations, borrowers can have their federal student loans forgiven, canceled, or discharged. Here is more information about the types of forgiveness and whether borrowers qualify due to their job or other circumstances. If your loan is forgiven, cancelled, or discharged, you are no longer obligated to repay any or all of it.

But it is crucial to remember that unless you are officially notified otherwise, you are still responsible for repaying your loan- regardless of whether you finish your school, get a job connected to your program of study, or are satisfied with the education you paid for with your loan. You are also still accountable for repaying your loan even if you were a minor (under the age of 18) when you initially signed your promissory note or received the loan.

Forgiveness, Cancellation, and Discharge Types

Public Service Loan Forgiveness

• Available for Direct Loans. 

If you work for the government or a non-profit, you may be eligible for loan forgiveness through the Public Service Loan Forgiveness (PSLF) Program. After you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for an eligible company, PSLF forgives the remaining debt on your Direct Loans. Learn more about the PSLF Program to see whether you might qualify under the new Limited Waiver

Teacher Loan Forgiveness

• Available for Direct Loans and FFEL (Federal Family Education Loan) Program loans.

If you work for the government or a non-profit, you may be eligible for loan forgiveness through the Public Service Loan Forgiveness (PSLF) Program. After you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for an eligible company, PSLF forgives the remaining debt on your Direct Loans.

• Note that you may not be eligible for both Teacher Loan Forgiveness and Public Service Loan Forgiveness if you make the same qualifying payments or serve for the same amount of time.
• Certain restrictions are temporarily waived for persons who have already enrolled in the Teacher Loan Forgiveness program under the Limited PSLF waiver.

Find out more about the PSLF’s limited waiver. Closed School Discharge

• Available for Direct Loans, FFEL Program loans, and Perkins Loans.

You may be eligible for a discharge of your federal student loan if your school closes while you are enrolled or shortly after you withdraw. Learn about the eligibility requirements for closed school discharge and how you can apply. Perkins Loan Cancellation and Discharge

• Available only for Federal Perkins Loans.

Based on your job or volunteer service, you may be entitled to have all, or a portion of your Perkins Loan canceled or dismissed (under certain conditions). This includes Perkins Loan Teacher Cancellation. Total and Permanent Disability Discharge

• Available for Direct Loans, FFEL Program loans, and Perkins Loans.

You may be eligible for a discharge of your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation if you are totally and permanently handicapped. Discharge Due to Death

• Available for Direct Loans, FFEL Program loans, and Perkins Loans.

Due to the death of the borrower or the student on whose behalf a PLUS loan was taken out, federal student loans will be discharged.

Discharge in Bankruptcy (in rare cases)

• Available for Direct Loans, FFEL Program loans, and Perkins Loans.

After filing for bankruptcy, you may be able to have your federal student loans dismissed. However, bankruptcy discharge is not automatic.

Borrower Defense to Repayment

• Available for Direct Loans. 

If you took out the loans to attend a school and the school failed to do something relevant to your loan or the educational services that the loan was intended to pay for, you may be eligible for a discharge of your federal student loans based on borrower defense to repayment. Depending on when you received your loan, the exact requirements for a borrower defense to repayment discharge may differ. False Certification Discharge

• Available for Direct Loans and FFEL Program loans.

You might be eligible for discharge if your school falsely certified your eligibility to receive your federal student loan. Unpaid Refund Discharge

• Available for Direct Loans and FFEL Program loans.

You may be eligible for a discharge of the portion of your federal student loan(s) that the school failed to return to the loan servicer if you withdrew from school and the school failed to make the mandatory refund of that loan installment to the loan servicer. Eligibility for Parent Borrowers As with loans made to students, a parent PLUS loan can be discharged if:

• You die (the parent)
• you (not the student on whose behalf you obtained the loan) become totally and permanently disabled, or
• If your loan is discharged in bankruptcy.
• Your parent PLUS loan may also be discharged if the child for whom you borrowed dies.

In addition, all or a portion of a parent PLUS Loan may be discharged if:

• The student for whom you borrowed could not complete his or her program because the school closed.
• Your eligibility to receive the loan was falsely certified by the school.
• Your eligibility to receive the loan was falsely certified through identity theft.
• The student withdrew from school, but the school didn’t pay a refund of your loan money that it was required to pay under applicable laws and regulations.

Have a question about which Forgiveness program is best for you? Contact TitanPrep for more information today!