Canceling Student-Loan Debt

Is it possible to cancel a student loan debt?

In rare cases repayment of student loans can cause extreme hardship

Yes, in rare instances, it is possible to cancel a student loan debt. For most borrowers, however, cancellation is not an option, although loan deferments or forbearances may be available and can be very helpful. Student loans can be much larger and harder to pay off than short-term personal loans. In those rare cases when a student-loan debtor is eligible for a cancellation of the debt, exercising the option to cancel can provide an enormous financial relief.

Canceling student loan debt means that a borrower does not have to pay back a loan obtained to pay for a college education. Eligibility for a cancellation depends on the kind of loan involved and the reasons why the debtor is unable to repay it.

Very few student-loan borrowers qualify for cancellation

Normally, student loan cancellations are available only to persons who can prove that they are permanently disabled and to the estates of students who pass away with loans still outstanding. Other limited circumstances where borrowers may qualify for student loan debt cancellation include:

  • Service in the United States military
  • Employment in a law-enforcement profession
  • Employment in a teaching profession for indigent populations
  • Employment in a health-care profession for indigent populations when there is a shortage of professionals in the field
  • And occasionally, service in the Peace Corps

Special program for childcare providers

According to the federal student aid website, part of an undergraduate Direct Stafford Loan or FFEL loan may be canceled under the Child Care Provider Loan Forgiveness Program, which is only available to qualified child-care providers who work with low-income populations and only when funding for this program is available.

Other special circumstances

Other special circumstances that may permit cancellation include:

  • Closure of a school before completion of required course work
  • Failure of a school to pay a lender a refund required under federal
  • Forgery of a signature on a promissory note promissory note or authorization for electronic fund transfer
  • Improper testing or false certification by the school of a borrower who lacked the ability to benefit from coursework

How to request a cancellation

If you think you may be entitled to cancellation of a Perkins-loan debt, you may apply either directly through the school or through the company servicing the loan. If you think you may be entitled to cancellation of a PLUS loan or a Direct Stafford loan, contact the Department of Education loan servicing center. Recipients of a PLUS loan or a FFEL Stafford loan may also contact the company that currently holds the loan and request information about canceling the debt.

A glimmer of hope

While everyone should plan on repaying student loans, there are situations where the obligation to pay creates an insurmountable financial hardship. Years after graduation, borrowers sometimes find themselves owing more on their loans than they did when they first graduated. In rare circumstances when the situation seems most hopeless, canceling student-loan debt may be possible.

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