College loan forgiveness refers to being released from the obligation to repay a loan. Two other words that are often used in reference to student loans are discharge and cancellation. Regardless of whether a loan is forgiven, discharged, or cancelled, it means that the borrower no longer needs to repay the loan. Generally speaking, college loan forgiveness refers only to federal student loans.
A loan typically must be repaid even if a person doesn't finish his or her degree, is unable to find a job, or is unhappy with the education he or she received. However, there are certain circumstances in which a federal loan can be forgiven. The situations in which a loan can be discharged depend on the type of federal loan that the student has taken out. The U.S. Department of Education offers two types of federal loan programs: direct loan programs and the Perkins Loan Program.
Types of Forgiveness, Cancellation, or Discharge
There are several types of college loan forgiveness for direct loans and Perkins loans. Just a few situations in which both direct loans and Perkins loans can be discharged are if the school closes, in the event of total and permanent disability, and in the event of death. Both of these types of loans can also be discharged in bankruptcy; however, this only occurs in rare cases.
Generally, a student loan can only be discharged in the event of bankruptcy if the borrower can show that the burden of repaying the student loan would impose a severe hardship. This high standard exists so that people do not declare bankruptcy simply to discharge the obligation to repay their student loans. While bankruptcy may not be a viable option, there are other options if you're having difficulty paying back your student loans.
There are also forgiveness situations that are specific to each type of loan. Direct loans can be discharged as a result of unpaid refund, or for false certification of student eligibility. There is also teacher loan forgiveness as well as public service loan forgiveness. The Federal Student Aid Office has a helpful fact sheet that summarizes the eligibility and loan repayment requirements for public service loan forgiveness. Perkins loans have their own cancellation and discharge circumstances, which apply to people who are employed in certain occupations or perform certain types of public service.
REPAYE: Revised Pay as You Earn
A repayment program known as Revised Pay as You Earn (REPAYE) caps a borrower's monthly repayment obligation to 10 percent of his or her income for federal student loan debts. This plan also forgives the debt after 20 years if all loans being repaid under the plan are for undergraduate study, or after 25 years if you're repaying any graduate or professional study loans. For example, if you began making payments on your federal student loan in 2005 and continued to make payments on the loan for 20 years, the remainder of your debt would be forgiven in the year 2025.
While this is the most generous government repayment plan, it was previously only available to people who took out loans after 2007 and had an especially low income in comparison to their debt. However, the Obama administration opened the REPAYE plan to all students who have a direct federal loan, as long as their debt isn't in default.
How to Apply for Forgiveness, Cancellation, or Discharge
Once a borrower determines that he or she is eligible for loan forgiveness, it's important to know the requirements for how to apply for college loan forgiveness. The Federal Student Aid Office offers helpful summary charts and applicable forms for the cancellation, forgiveness, and discharge of direct loans and Perkins loans.
While direct loans have standard application forms, there isn't a standard application for a Perkins loan cancellation. Instead, a person interested in a Perkins loan cancellation needs to contact the college the person was attending when he or she received the loan. It's important to note that, generally speaking, the borrower should continue to repay the loan while his or application is under review.
Getting Legal Help
If you have questions about college loan forgiveness, you may want to contact an education attorney in your area.