Tuesday, January 21, 2014

Direct Loan and FFEL Program Loan Forgiveness, Cancellation, and Discharge Summary

Borrower's total and permanent disability or death 100 percent If you are a parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies. ------------------------------------------------------------------------------------ Bankruptcy (in rare cases) 100 percent Cancellation is possible only if the bankruptcy court rules that repayment poses an undue hardship to the borrower. ------------------------------------------------------------------------------------ Closed school (for borrowers who could not complete their program because the school closed while they were enrolled or borrowers who withdrew not more than 90 days before the school closed) 100 percent For loans received on or after Jan. 1, 1986. ------------------------------------------------------------------------------------ False loan certification (school falsely certified a borrower's eligibility to receive a loan) 100 percent For loans received on or after Jan. 1, 1986. ------------------------------------------------------------------------------------ False certification by reason of identity theft (loan was made as a result of the crime of identity theft, as determined by a court) 100 percent Effective July 1, 2006. ------------------------------------------------------------------------------------ School does not make required return of loan funds to the lender Up to the amount that the school was required to return. For loans received on or after Jan. 1, 1986. ------------------------------------------------------------------------------------ Full-time teacher for five consecutive years in a designated elementary or secondary school or educational service agency serving students from low-income families. Must meet additional eligibility requirements. Up to $5,000 (up to $17,500 for elementary/secondary special education teachers and secondary math and science teachers) of the total loan amount outstanding after completion of the fifth year of teaching. Under the Direct and FFEL Consolidation Loan programs, only the portion of the consolidation loan used to repay eligible Direct Loans or FFEL Program loans qualifies for loan forgiveness. For Direct Subsidized and Unsubsidized Loan and Subsidized and Unsubsidized Federal Stafford Loan borrowers with no outstanding balance on a Direct Loan or FFEL Program loan on Oct. 1, 1998, or who have no outstanding balance on a Direct Loan or FFEL Program loan on the date they received a loan after Oct. 1, 1998. PLUS loans are not eligible. To learn more about the eligibility requirements for teacher loan forgiveness and to find out whether your school or educational service agency where you teach is considered to serve low-income students, go to Teacher Loan Forgiveness. ------------------------------------------------------------------------------------ Loan forgiveness for public service employees (Direct Loan Program only) 100 percent of the remaining outstanding balance on an eligible Direct Loan. For a borrower who is not in default and who makes 120 monthly payments on the loan after Oct. 1, 2007, under certain repayment plans, while the borrower is employed full-time in a public service job. You may not apply for forgiveness until after you have made all of the required 120 qualifying monthly payments.