Navigating Student Loan Discharge Eligibility: A Comprehensive Guide

Under specific conditions, borrowers may be eligible for the discharge or forgiveness of their federal student loan debt, either in full or in part. It is crucial to remember that until written confirmation of approval is received, student loan obligations remain in effect, and payments must continue unless forbearance has been granted. Various discharge and forgiveness programs exist, each with its own set of requirements and guidelines.

Understanding Loan Discharge, Forgiveness, and Cancellation

Student loan forgiveness, cancellation, and discharge are terms that generally mean the same thing: you won't have to pay back some or all of your loan. There are special situations and programs that allow your loans to be forgiven, canceled, or discharged. Loan repayment programs can also help with student loans.

Types of Federal Student Loan Discharges

Total and Permanent Disability Discharge

If a borrower becomes permanently disabled, their federal student loan debt may be discharged. The Department of Education (ED) will provide the necessary information and forms to file for discharge and will notify the loan servicer(s) about the application. If a loan was certified before the date the physician certified the discharge application, any proceeds disbursed after the physician's certification must be canceled.

Discharge Due to Death

In the unfortunate event of a borrower's death, their student loan debt, including any PLUS loans taken out by parents on behalf of the student, will be canceled upon submission of documentation to the loan servicer.

Closed School Discharge

Borrowers who attended a school that closed before they could complete their studies may be eligible for a discharge of their federal student loan. This applies if the borrower was enrolled when the school closed and could not finish their program due to the closure. Students on an approved leave of absence are considered enrolled. However, borrowers are not eligible if they are completing a comparable educational program at another school. If a comparable program is completed after the loan is discharged, the borrower may have to repay the amount of the school closure discharge.

False Certification Discharge

A loan may be discharged if it was falsely certified in the borrower's name due to identity theft. To prove identity theft, reasonably persuasive evidence must be presented to the loan servicer, in addition to following the Federal Trade Commission's guidelines for recovering from identity theft. A loan may also qualify for discharge or forgery discharge if your name was forged on a loan document.

Unpaid Refund Discharge

Borrowers may qualify for partial discharge of a student loan if their school failed to pay a tuition refund required under federal law. Only the amount of the unpaid refund will be discharged.

Forgery Discharge

A loan may also be discharged if it was falsely certified in the borrower's name due to forgery. If someone forged your signature on the loan application, promissory note or authorization for electronic funds transfer, you may qualify for a loan discharge.

Discharge for Spouses and Parents of 9/11 Victims

Spouses and parents of victims of the September 11, 2001, terrorist attacks may be eligible to have any loans owed on that date discharged.

Bankruptcy Discharge

Bankruptcy does not automatically discharge student loan debt. Loans may only be discharged in a separate proceeding in bankruptcy court called an Adversary Proceeding. Cancellation is possible only if the court rules that repayment would be an undue hardship for the borrower.

Federal Student Loan Forgiveness Programs

Teacher Loan Forgiveness Program

Eligible teachers may have all or a portion of their student loan debt repaid under the Teacher Loan Forgiveness Program. The US Department of Education is reviewing a recent executive order about the Public Service Loan Forgiveness (PSLF) program. This is a changing area of law. You may be eligible for loan forgiveness of up to $17,500 if:You teach full time for five consecutive years in a designated school or agency serving low-income students, andYou have a Direct Loan or Federal Family Education Loan. You cannot receive credit toward teacher loan forgiveness and PSLF for the same period of service.

Child Care Provider Loan Forgiveness Program

Borrowers who are new on or after October 1, 1998, and meet the required criteria may have their student loan obligations forgiven under the Child Care Provider Loan Forgiveness Program.

Army Chaplaincy Loan Repayment Program

This program pays up to $20,000 over three years toward qualified loans incurred while pursuing the professional degree that qualifies a person for the chaplaincy.

Department of Justice Attorney Student Loan Repayment Program (ASLRP)

This incentive program allows the Department of Justice to repay certain types of federal student loans as a recruitment or retention incentive for highly qualified attorneys in exchange for a three-year service obligation. Attorneys participating in the ASLRP may receive awards of up to $6,000 per calendar year during each year of the three-year service obligation.

State Department of Health Dental Loan Repayment Revolving Fund

A revolving fund has been established by the State Department of Health to be designated as the Dental Loan Repayment Revolving Fund for the purpose of repaying dental student loans.

Faculty Loan Repayment Program (FLRP)

The FLRP pays up to $40,000 for a two-year service obligation to eligible health professions faculty members from disadvantaged backgrounds. Participants should also receive matching funds from their employing educational institution.

Indian Health Service Loan Repayment Program (IHSLRP)

The IHSLRP pays up to $24,000 per year for two years of continuous, full-time service at Commissioned Corps, Civil Service, and Direct Tribal Hire facilities or in an approved Indian health program.

National Health Service Corps (NHSC) Loan Repayment Program

The NHSC Loan Repayment Program pays up to $50,000, tax-free, to primary care medical, dental, and mental health clinicians in exchange for two years of service at an approved site in a Health Professional Shortage Area.

National Institutes of Health (NIH) Loan Repayment Programs (LRP)

The NIH LRPs encourage individuals to pursue research careers by repaying up to $35,000 of their qualified student loan debt each year.

Navy's Health Professions Loan Repayment Program (HPLRP)

The HPLRP provides a maximum yearly loan repayment of $40,000 (minus approximately 25 percent for federal income taxes). Payment is sent directly to the lending institution.

Nursing Education Loan Repayment Program (NELRP)

The NELRP aims to alleviate the critical shortage of registered nurses in non-profit health care facilities. The program pays 60 percent of an eligible participant's qualifying education loan balance for two years of service. For an optional third year, participants receive an additional 25 percent of their original qualifying education loan balance.

Public Service Loan Forgiveness (PSLF) Program

The Public Service Loan Forgiveness Program was created to encourage individuals to enter and continue working full-time in public service jobs. Under this program, you may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 payments on loans under certain repayment plans while employed full time by certain public service employers.

Specialty Equipment Market Association (SEMA) Loan Forgiveness Program

The SEMA loan forgiveness program aids recent graduates who have worked in the automotive industry for at least one year, work for a SEMA-member company, and have outstanding student loans.

Veterinary Medicine Loan Repayment Program (VMLRP)

The VMLRP pays up to $25,000 each year towards qualified educational loans of eligible veterinarians who agree to serve in National Institute of Food and Agriculture (NIFA) designated veterinarian shortage situations for three years.

Income-Driven Repayment (IDR) Forgiveness

Most federal student loans are eligible for at least one income-driven repayment plan . Income-driven repayment (IDR) plans cap your monthly payments based on your income and family size. If your income is low enough, your payment could be as low as $0 per month.Depending on the IDR plan, the remaining balance on your loans may be forgiven after 20 or 25 years of repayment.

One-Time Adjustment to Fix IDR Loan Forgiveness

On April 19, 2022, Department of Education (ED) announced several changes and updates that will bring borrowers closer to forgiveness under IDR plans. ED will do a one-time adjustment to count any month spent in repayment, some deferment periods (prior to 2013), and some forbearance periods toward loan forgiveness. For some borrowers, these changes mean that they will receive additional years of credit toward loan forgiveness. If you have loans that have been in repayment for more than 20 or 25 years, those loans may immediately qualify for forgiveness.Borrowers who have reached 20 or 25 years (240 or 300 months) worth of eligible payments for IDR forgiveness will see their loans forgiven as they reach these milestones. ED will continue to discharge loans as borrowers reach the required number of months for forgiveness. All other borrowers will see their loan accounts updated in 2024.

What counts towards the 20 or 25 years required for IDR forgiveness?

Any months with time in repayment status (regardless of the payments made, loan type, or repayment plan).
12+ months of consecutive forbearance or 36+ months of cumulative forbearance.
Months spent in economic hardship or military deferments after 2013.
Months in deferment prior to 2013 (except in-school deferment).
Any time in repayment prior to consolidation on consolidated loans.

What loans qualify for the IDR one-time adjustment?

Only federal student loans managed by Department of Education (ED) qualify for the one-time IDR adjustment. Borrowers with Direct Loans or federally-managed FFELP loans will not have to take any action in order to benefit under the one-time account adjustment. Any borrower with ED-held loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if the loans are not currently on an IDR plan.Borrowers with FFELP loans held by commercial lenders or Perkins loans not held by ED can benefit if they consolidate into Direct Loans. Borrowers must consolidate by June 30, 2024, in order to benefit from the one-time IDR account adjustment. Borrowers can apply for a Direct Consolidation Loan online or with a paper form .

Strategies for Achieving Loan Forgiveness

Make sure you qualify: Use the PSLF Help Tool to figure out your next steps. Department of Education (ED) and is free to use.
Submit the forms suggested by the PSLF Help Tool to document your qualifying employment and receive credit for your monthly payments.
Make sure you have the right type of loans: Only federal Direct Loans can be forgiven through PSLF. If you have other federal student loans such as Federal Family Education Loans (FFEL) or Perkins Loans you may be able to qualify for PSLF by consolidating into a new federal Direct Consolidation Loan.
Check it regularly to make sure it matches your records. You do not have to make the 120 qualifying payments consecutively.
Understand the CARES Act Payment Pause: Paused payments count toward PSLF as long as you meet all other qualifications. You will get credit as though you made monthly payments. Visit ED for more information on the payment pause and PSLF .
Request credit for deferments and forbearances: Deferments prior to 2013 and extended periods of forbearance will be automatically counted as qualifying payments. To request credit for shorter forbearancesâless than 12 months in a row, or under 36 months altogetherâfile a complaint with the FSA Ombudsman .
You can appeal if youâre denied: ED offers an online form to request your PSLF/TEPSLF denial be reconsidered . To prepare to fill out the form, gather information about the payments you believe should be counted. This includes the dates of these payments; tax information for your public service employer at that time; and digital proof of your employment and payments, such as W2 forms and letters or statements from the loan servicer.
Stay out of default: If your federal loans go into default, you will need to rehabilitate or consolidate them to get back on track to qualify for PSLF. Compare which option may be best for you .
Stay on track for loan forgiveness: Public service employees can use these guides to make sure they are on track for loan forgiveness.

Illinois Loan Forgiveness and Repayment Programs

Illinois offers loan forgiveness and repayment programs for qualifying Illinois residents with student loans who agree to work in Illinois in an understaffed field, such as teaching or nursing.

Community Behavioral Health Care Professional Loan Repayment Program

ISAC has a program to help mental health and substance use professionals with their student loans. To get funding, you must practice in a community mental health center located in an underserved area.

To be eligible, you must:

Be a US citizen or an eligible noncitizen
Live in Illinois
Have a student loan balance
Have worked at least 12 consecutive months as a behavioral health professional in the above-mentioned settings
Have not defaulted on a student loan

The Illinois Department of Financial and Professional Regulation must have given you your license. This program is for these professions:

Psychiatrist
Psychologist
Advanced practice registered nurse
Physician assistant
Licensed clinical social worker
Licensed clinical professional counselor
Certified alcohol and drug counselor
Licensed marriage and family therapist
Certified recovery support specialist
Professional possessing a Master's degree in counseling, psychology, social work, or marriage and family therapy
Professional possessing a Bachelor's degree in counseling, psychology, or social work

Important Considerations

Processing Time: It may take some time for your loan servicer to process your discharge and for your account to reflect this change. Most borrowers will have their discharge processed within two weeks, but for some borrowers, processing could take more time.
Government Shutdown Impact: The government shutdown could impact relief. The government has been shut down since October 1, and federal agencies have enacted their contingency plans to ensure critical functions stay in operation. However, due to furloughed and terminated staff at the Department of Education, paperwork processing â including for forgiveness â could be delayed.
Tax Implications: Delays could also have tax implications. A 2021 provision in the American Rescue Plan made student-loan forgiveness tax-free through 2025, so after January 1, 2026, borrowers who receive relief could face thousands of dollars in new tax bills.
Scams: No student loan borrower will have to pay any fees to receive their credit toward forgiveness. If someone asks you to pay them to get you loan forgiveness, itâs a scam.
Continued Payments: Depending on the type of forgiveness, cancellation, or discharge youâre applying for, you may have to make payments while your application is reviewed.

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