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Understanding Student Loan Discharge

Ways to Discharge Student Loans
Rebecca Safier
Rebecca SafierUpdated March 2, 2023
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Payments on federal student loans are set to resume in the autumn of 2023, but not every borrower will have to start paying again. Those with certain special circumstances could qualify for a discharge of student loan debt. Some borrowers may qualify for discharge in the event of bankruptcy, for instance, while others would qualify if they have a total and permanent disability. Read on for a closer look at how to discharge student loans and what it takes to qualify.  

What Is Student Loan Discharge?

Student loan discharge occurs when the government cancels part or all of your federal student loan balance. It’s different from forgiveness programs, which typically require several years of public service to forgive your loans. Instead, the government could issue a discharge of student loans for you right away in certain circumstances. However, most student loan discharge isn’t automatic. You’ll still need to apply and provide proof that you qualify. 

How Does Student Loan Discharge Work?

Each student loan discharge program has its own requirements, but for all of them, you must complete an application. Review the various discharge options, and contact your loan servicer if you have questions about your eligibility or how to apply. As part of your application, you’ll need to provide documentation to show you’re eligible. If you’re applying for total and permanent disability discharge, for instance, you may need to provide medical records or a letter from your doctor. It may take some time for your loan servicer to process your request, so continue paying your student loans in the meantime so they don’t fall into default. Student loan discharge can have tax implications, though borrowers typically don’t need to worry about that currently. The American Rescue Plan Act of 2021 waived taxes on discharged and forgiven federal student loans through 2025.  Still, it might be smart to review any tax implications you could potentially face.

9 Ways to Discharge Student Loans

Here are nine discharge of student loan programs the Department of Education offers to qualifying borrowers. 

Closed School Discharge 

If your school closes while you’re attending or shortly after you leave, you might qualify for a discharge of student loans. Specifically, you need to be enrolled or have left within 120 days of your school shutting down if your loans were disbursed before July 1, 2020 or within 180 days if your loans were disbursed after this date. If this applies to you — and you have the records to prove it — the government could discharge 100% of your Direct loans, Federal Family Education Loans (FFELs), and Perkins loans. 

Total and Permanent Disability Discharge 

Borrowers with a long term disability could qualify for student loan discharge. You might be eligible if one of the following applies to you: 
  • You’re a veteran with a service-related disability and can no longer work. 
  • You’re receiving Social Security Disability Insurance or Supplemental Security Income benefits.
  • Your doctor has determined you have a total and permanent disability that has lasted for 60 months or will continue for another 60 months or more. 
If any of these apply to you, contact the loan servicer Nelnet about pausing your student loan payments while you apply. 

Borrower Defense to Repayment 

If you were defrauded by your school, you could qualify for a student loan discharge. This applies if your school violated state laws or used illegal or deceptive tactics to persuade students to enroll. Students who attend the now-defunct Corinthian Colleges, for example, received student loan discharge through this borrower defense program. If you pursue borrower defense, your loan servicer can put your loans into forbearance while you apply. 

False Certification Discharge 

You could also get your student loans discharged if your school falsely certified your eligibility to receive the loans in the first place. This might apply if: 
  • Your school certified your eligibility for loans even though you didn’t meet requirements 
  • Your school signed your application or promissory note without your knowledge 
  • You were the victim of identity theft and someone else borrowed the loan in your name
  • You trained for a career at school that you can’t partake in due to your age, a criminal record, or another eligible reason 

Forgery Discharge 

Along similar lines, you could get your student loans discharged if someone forged your name on your student loan application or promissory note without your knowledge. If you can prove this occurred, you could get the student loans dismissed. 

Unpaid Refund Discharge 

You may get part of your student loans discharged if your school didn’t pay a student loan refund when it was supposed to. For instance, if you withdrew from school before using your loan, your school should have returned the loan proceeds to you or your loan servicer. If it failed to do so, you could get that amount discharged. 

Discharge in Bankruptcy 

Although discharging student loans in bankruptcy is notoriously difficult, it’s not impossible. You’ll need to pass the Brunner Test, which essentially requires you to prove that paying back your loans causes undue hardship. Depending on the court’s ruling, you may be able to get part or all of your student debt discharged. 

Discharge Due to Death 

If you’ve wondered what happens to a student loan when you die, the answer is this: Federal student loans are discharged in the event that the primary borrower dies. The debt doesn’t pass to anyone else, but instead will be canceled. 

Perkins Loan Cancellation and Discharge 

While the Perkins loan program ended in 2017, borrowers who got a Perkins loan before that time might still owe money on it. There are a variety of cancellation and discharge options for Perkins loans, including total and permanent disability and eligible employment or volunteer service. 

When Struggling to Make Student Loan Payments

If you’re struggling to make payments on your student loans but don’t qualify for any of the discharge programs described above, you may still have options. Here are some alternatives to explore if you’re having trouble affording your student debt. 

Student Loan Refinancing

One option to explore is refinancing your student loans with a new lender. Depending on your credit, you might qualify for better rates than you have now. Plus, you can choose new repayment terms, perhaps opting for a longer term to make your monthly payments more affordable. Student loan refinancing can also combine multiple loans into one, though it’s not the same as federal loan consolidation. There are differences between student loan refinancing vs. consolidation that can be helpful to know. Be cautious about refinancing federal student loans, however, since doing so turns them private. Private loans are not eligible for federal discharge programs, repayment plans, forgiveness, or other protections, so think carefully about whether you want to sacrifice these federal benefits before refinancing. 

Income-Driven Repayment 

If you have federal student loans, you could also explore income-driven repayment plans. Depending on how much money you make, your monthly student loan bill could be as low as $0 on an income-based plan. If you still owe a balance at the end of your 20- or 25-year term, it could be forgiven. The repayment period for income-driven repayment plans varies from 20 to 25 years. While these plans help make loan payments more affordable for borrowers, extending the loan terms may result in accruing more interest over the life of the loan.President Biden has announced the creation of the Saving on a Valuable Education (SAVE) Plan, which replaces the existing Revised Pay As You Earn (REPAYE) Plan. Borrowers on the REPAYE Plan will automatically get the benefits of the new SAVE Plan.The SAVE Plan, like other income-driven repayment (IDR) plans, calculates your monthly payment amount based on your income and family size. According to the White House, the SAVE Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers.In summer 2024, borrowers on the SAVE Plan will have their payments on federal undergraduate loans cut in half (reduced from 10% to 5% of income above 225% of the poverty line). A beta version of the updated IDR application was made available in early August 2023 and includes the option to enroll in the new SAVE Plan. The DOE says that if you apply for an IDR plan (such as the SAVE Plan) in the summer of 2023, your application will be processed in time for your first federal student loan payment due date. 

Student Loan Forgiveness 

Besides these student loan discharge programs, the government also offers various student loan forgiveness programs. Public Service Loan Forgiveness, for example, forgives your federal loans after 10 years in public service. The Teacher Loan Forgiveness program will forgive up to $17,500 in federal student loans after five consecutive years of teaching in a low-income school. Veterans and active-duty servicemembers can also find options for military student loan forgiveness. Explore your options for forgiveness to see if you might qualify. Some states and employers also offer loan repayment assistance programs, which provide money you can use to pay down your student loans. 

Deferment and Forbearance 

If you can’t afford to make any payments on your student loans, you might request to postpone payments temporarily through deferment or forbearance. In March 2020, payments on federal student loans were put on pause because of Covid-19 lockdowns. This year the Department of Education’s COVID-19 student loan forbearance program is ending. On September 1, 2023, interest resumes, and payments will be due beginning in October 2023.

The Takeaway

Student loan discharge programs protect borrowers who have a disability, were defrauded by their schools, were victims of identity theft, or have another qualifying reason why they can’t (or shouldn’t have to) pay their student loans. If you think you qualify for any of these programs, explore the Federal Student Aid website for additional application instructions and reach out to your loan servicer for assistance. Make sure you’re pursuing a reputable program and avoiding any student loan forgiveness scams.In addition, you can explore other options for help making your student loan payments more affordable, such as student loan refinancing. Lantern can help you quickly and conveniently compare refinancing options from multiple lenders all at once. That way you can find the rates and terms that suit you best.

Frequently Asked Questions

What does getting student loans discharged mean?
How can I have my student loans discharged?
Will having my student loans discharged affect my credit?
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About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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