Discharge/Cancellation

For a PLUS Loan, includes death but not disability of the student for whom the parents borrowed.

Full-time teacher for five consecutive years in a designated elementary or secondary school serving students from low-income families.

• Up to $5,000 of the aggregate loan amount that is outstanding after completion of the fifth year of teaching. A borrower might qualify for loan forgiveness under the Direct Consolidation and the FFEL Consolidation Loan programs. If so, only the portion of the consolidation loan used to repay Direct Stafford Loans or FFEL Stafford Loans qualifies.

For Direct and FFEL Stafford Loans received on or after October 1, 1998, by a borrower with no outstanding loan balance as of that date. At least one of the five consecutive years of teaching must occur after the 1997-98 academic year. (To find out whether your school is considered a low-income school, visit www.studentaid.ed.gov. Click on "Repaying," then click on "Cancellation and Deferment Options for Teachers." Or, call
1-800-4-FED-AID.)

Bankruptcy (in rare cases)

Cancellation is possible only if the bankruptcy court rules that repayment would cause undue hardship.

Closed school (before student could complete program of study) or false loan certification

100%

• For loans received on or after January 1, 1986
• 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 January 1, 1986

Beginning July 1, 2002, a borrower who is determined to be totally and permanently disabled will have his or her loan placed in a conditional discharge period for three years from the date the borrower became totally and permanently disabled. During this conditional period, the borrower doesn’t have to pay principal or interest. If the borrower continues to meet the total-and-permanent disability requirements during, and at the end of, the three-year conditional period, the borrower’s obligation to repay the loan is canceled. If the borrower doesn’t continue to meet the cancellation requirements, the borrower must resume payment. Total and permanent disability is defined as the inability to work and earn money because of an injury or illness that is expected to continue indefinitely or to result in death. More information on this discharge can be found in the promissory note and by contacting the loan holder.