Student Loan Forgiveness

Careers that allow for cancellation of Student Loans

Though many people believe it is not possible to avoid paying a student loan there are many exceptions to this and one important one is related to the employer  the student chooses after graduation.  There are many federal programs that allow for debt forgiveness and cancellation that are offered by a variety of employers for a variety of different types of student loans.  There are also state specific programs that any student should review prior to choosing a career and employer within their particular state.

Public Service

The public service program for loan forgiveness and cancellation is very simple.  It is allowed for Federal Direct Loans that are being paid using one of the repayment plans that allow for the public service forgiveness program.  Under this program the borrower continues to make their payment and remain current on that payment for 10 years.  There are specific rules relative to any payment default and these rules are subject to change but under normal circumstances after the 120th payment the loan can be forgiven without tax consequence to the borrower.  This program is not available for Federal Family Education Loans (FFEL) nor is it available for Perkins loans unless those loans are consolidated into a Federal Direct Loan.  Private non-federal student loans are not eligible for this program nor are they eligible to be consolidated into a Federal Direct Loan.

Education Occupations

There are several popular student loan forgiveness programs that are available for teachers.  Most of these credit the loan balance for each year of service up to a maximum amount.  Many Perkins loan programs allow for the loan balance to be paid in full.  Once such program that is available to FFEL, Direct loans, and some consolidation loans is the partial credit for each year that is taught in a low income qualified school up to a maximum of $17,500.  Another is the teacher grant program called TEACH GRANTS program that provides $4,000 annually to those that are teaching within specially identified special needs areas within at risk schools.  And yet another way for teachers to achieve full forgiveness is if they direct their career to operate under the public service 10 year full cancellation program.  For those that chose teaching as an occupation there are numerous ways to reduce if not fully eliminate student loan debt.

Perkins Full Debt Cancellation

The following are some but not all of the ways in which a Perkins loan borrower can possibly qualify for full debt forgiveness. Of course each item has specific restrictions and ways in which to qualify but this list gives a good overview for items to research further:

1. Full time educator in identified low income schools.
2. Full time educator in subject areas that have been identified as having a shortage of teachers.
3. Full time special education instructor in a not for profit secondary or not for profit elementary school.
4. Full time nonprofit, public, or family service employee that serves at risk communities, families, and children.
5. Some full time medical professions such medical technicians and nursing.
6. Full time correctional or public law enforcement officer.
7. Full time employee of the educational division of the federal Head Start Program.
8. Active duty military with 50% or greater of their time deployed to a hostile environment.

Americorps & The Peace Corps

Depending on your service to Americorps or the Peace Corps you can be eligible for partial loan forgiveness, forbearance of payments or full loan forgiveness.  Each is a specific situation and is affected by the way in which you interact with and serve the public through these organizations. The full loan forgiveness would be if your association and service qualifies under the 10 year public service program for federal loan forgiveness.  If a student is considering these organizations for service it would be advisable for them to understand that ways in which their service can gain credits toward their outstanding student loan balance.

Other Programs

There are countless other programs that are available to those that are interested.  One such program is through service in the National Health Service Corps and another is through private employers.  It is important to always investigate and look for available programs that are offered and to make certain every student takes advantage of every program that is made available to them.

Death and Disability Impact on Student Loans

Federal Student loan debt is always fully discharged on death.  This is an important fact to understand for those that are handling the estate of a deceased borrower.  It is also critical to understand that as the spouse of the deceased you will not be forced to carry the burden of the outstanding debt.  For disability on the other hand getting full forgiveness is not very common unless there is a severe disability.  But for different levels of disability there certainly is relief available to those afflicted.  These programs are made available for federal student loan programs, private programs have their own rules and ways in which they address disability.  Private loan borrowers should seek guidance from their loan issuer.

There are countless rules that specifically relate to obtaining student loan forgiveness as a result of a disability.  The first thing that needs to be determined and agreed to between the borrower and the loan issuer is the classification of the borrowers disability.  For total forgiveness and not simply a payment deferral or forbearance the borrower must be classified as totally and permanently disabled.

Total and permanent disability is a condition that needs to be certified by a Doctor.  The Doctor must explicitly state that the person is unable to work in any capacity and that the condition is likely to result in death and/or last for a period greater than the next five years.  For military veterans the standard is the same but the veteran is not required to have the condition certified by a Doctor.  This full discharge is available to Federal Family Education Loan (FFEL) borrowers, Federal Direct Loan borrowers, and Perkins loan borrowers.  Those with the parent PLUS loans are only eligible if they are disabled themselves and not if the child is disabled.

It is common that with all federal loan disability applications that the Doctor that provided the certification of disability will receive a number of follow up questionnaires and letters that must be responded to in order to complete the disability application.  It is important to let the Doctor know to expect this and to let them know the critical nature of a timely response.

Under most of the discharge rules you must not be able to work in any capacity to seek permanent relief from the loan debt.  The relief cannot be sought if you are simply not able to work and earn money in the occupation for which you were trained and obtained the loan to work within.  In fact, under the FFEL disability program they put you on a 3-year temporary discharge program after receiving the initial Doctor certification.  During this time you are not allowed to work at all nor are you allowed to look for work.  After the three year trial period, if you are still disabled and not earning an income then they will allow the debt to be fully discharged due to disability.

One last point to keep in mind, if you are seeking a discharge due to disability you cannot take out additional student loans, even if for retraining or a new career.  If you do, then most loan programs will disqualify you from the initial discharge seeing that you are amidst retraining and therefore it is foreseeable to them that you will be able to work again and earn an income in the future.

Student Loan Cancellation due to False Certification

One of the primary ways in which to have a student loan canceled is if there was any false certification involved.  False certification is broadly defined and contains four basic elements.  Only one of the four elements needs to be present in order to file an application for discharge under false certification.  The four elements within false certification are if you were unable to benefit from the education through no fault of your own, if you had a disqualifying status where you should not have been admitted to the school, if you did not authorize the loan to be taken out in your name, or if you were the victim of identity theft.

Unable To Benefit aka Ability To Benefit (ATB)

This particularly applies to those that do not have the required qualifying education to be admitted to a school or program.  In this situation a school is taught at a certain level and students are expected to be able to comprehend the information and benefit from the education.  If the student has not reached the level of formal education to benefit from the program, many schools have an exam they administer in order to see if that student can participate at the level necessary in order to learn at the school.  If this exam is not handled properly, then the student may have a claim that they relied on the school to properly test them for their ability to succeed at the school.  If the test administrator uses a test not approved by the Department of Education, or if they allow cheating, collaboration, or extra time over and above the time the exam was designed to take, then it is possible some students will pass that are not truly qualified.  If any of this occurred, then there may be a chance the loan can be discharged because the student was allowed into a program for which they were “unable to benefit”.

Disqualifying Status

When a school accepts a student into a program where they are working toward a specific license, certification, or career it is important that the school not take student loan money for students that are not qualified to work in those careers.  The reason discharge is allowed is because the school itself is at fault for misleading the student and taking the student loan money.  For example, if a person is being trained in the school to be a bank employee and yet they have a felony in their background.  The student can apply for discharge because a bank cannot hire a person with any type of felony conviction in their record per FDIC rules.  Another example would be a person that has a history of losing consciousness.  If a school allows them into a truck driver program and yet the state will not issue a truck driver license to a person who has a history of losing consciousness, then that student can file for discharge of that student loan debt under the disqualifying status provision.

Forgery

If the financial aid office or any employee of the school a person is attending applies for and cashes a student loan check in the name of a student without that student’s authorization or signature, then the student can seek discharge of that debt.  This only applies if it is a school official that has obtained the loan and cashed the check.  It does not apply if the student is claiming a third party that is not related to the school has done this.

Identity Theft

This applies under two circumstances.  The first is if the person obtains the loan in the students name and they attend the school using that name.  In this instance it is identity theft and the student whose name was used can seek a discharge.  The second instance is when a student attends a school and a loan is taken in their name by another party using their information.  In both instances a loan was fraudulently obtained using the legitimate person’s information.  To seek a discharge in these circumstances the person must obtain a court judgment showing they were a victim of criminal identity theft.

There are few ways in which someone can have a student loan canceled using a school related argument.  For example, those that feel they went to a school that did not provide them with a proper education, job placement services, or left you with other unfulfilled promises cannot simply cancel the loan.  But given the fact that there are some legitimate issues that arise with schools, there are a few circumstances that may give you hope in cancellation.

School Closure

One reason for cancellation that is oftentimes granted is if you were attending a school that was closed during your enrollment or if you chose to leave a school within 90 days of its closure.  If the school only closes one of many locations then the location you were attending must be the one that was closed.  If this has happened to you and if your student loan was originated after 1986 then you may be granted cancellation.  This cancellation is not automatically granted, but it does allow you to apply for it.  This application covers all Perkins, Stafford, PLUS, and Federal Family Education Loans.

False Certification

Under this category one or more of your qualifications or the schools certifications were not properly presented and you were essentially defrauded.  This includes if the person attending the school fraudulently claimed they were you. The four categories within this are ability to benefit (ATB), disqualifying status, forgery, and identity theft.

Ability To Benefit (ATB)

Many programs have a minimum standard educational level that is required to be able to understand the coursework and benefit from the program.  For example, a person that has graduated high school or has the equivalent GED may be the minimum standard for the school.  A person that does not have this attained level of education may not be able to complete coursework or understand what is expected of them. Many schools have a standardized exam that they give these students in order to determine if they have the ability to benefit from the educational programs offered by the school.  If the student passes this “ability to benefit” test then they are allowed into the program.

But if the test is not properly administered, if students are allowed to cheat, if they are given more time than necessary, or if the test is not approved by the federal department of education then it is possible that you have a claim to cancel your student loans that were acquired to enter this program.  The foundation for the argument is that you did not or could not benefit from the school because you were not qualified.  You did not know you were not qualified because the school did not administer the test properly and therefore it is through no fault of your own.

Disqualifying Status

If you are allowed to attend a school in order to achieve a certification or degree in a field for which you are not eligible to be employed, you may seek discharge of that student loan under the disqualifying status provision.  An example of this type of situation would be a person that attends a professional driver training program only to find out that their history of passing out disqualifies them from attaining driver certification from their state.  Or for a person attending a school that teaches you to be in the security industry but that their criminal history disqualifies them from getting a security license.  The same for a person attending school to be an annuity broker only to discover their background disqualifies them from selling annuities.  These are all examples of situations where the school should have not taken the money from the loan and should not have admitted the student.  Therefore the stud en can be relieved of the burden of them loan through having it discharged.

Forgery

This is a simple case where the school itself completes your loan paperwork, obtains the loan, and cashes the loan check without your signature or authorization.  If the school does this and does not have either your signature nor your authorization it is possible for you to get that debt discharged. The important restriction to this is that it must be the school that has forged your signature and not a third party not related to the school.

Identity Theft

This is situation where you must prove that you were the victim of identity theft and that the party that received the loans and attended the school was not you.  It can also apply if you did go to the school but you did not obtain the loans.  These cases are difficult to prove and difficult to use as a qualification for discharge.  But if you are the legitimate victim if this type of crime it is worth your time to make certain all aspects of it are handled.

Can I cancel my student loans?

Previously, we talked about how to legally get rid of your student loans. Let us today take a closer look into the various circumstances that allow your to cancel your student loans. Canceling a student loan is something that can be accomplished given you, the lender, or the school has met or violated certain rules or obligations related to the loan.  When summarizing these situations it is best to think of all of the logical situations in which a loan should be canceled.  This is not the wishful thinking of many borrowers where they simply do not want to honor the debt, but the true situations where the loan itself was more or less provided under false or fraudulent conditions.

One situation that allows for full loan cancellation is if the school that is being attended closes.  This is an important provision because even if a student is near graduation from a multi-year program, if the school closes prior to graduation the student is eligible to apply for full loan cancellation.  Cancellation is not guaranteed, but under this circumstance the student does meet the minimum threshold for consideration.  This also applies when a school simply discontinues a students specific course of study or if they close an individual campus and not the entire school or program.  If the school closes the campus that a student attends, they may be eligible for loan cancellation.

If the school allows a student to attend that is not qualified nor prepared to handle the academic environment of that school, then there is a possibility that student can have the loan canceled under the provision of false certification and ability to benefit.  This is primary allowed when a student has not graduated high school nor obtained a GED and yet takes qualifying exams and tests, administered by the school, to see if they are able to participate in the school program.  If the exams are not properly administered or are not approved by the federal Department of Education, then it is possible the student could have been falsely certified as being able to benefit from the program and as a result was admitted under a false certification through no fault of their own.  In this case it is possible for the the student to request loan cancellation.

False certification and ability to benefit also extends to a provision called disqualifying status.  This primarily applies to vocational and technical schools that are teaching with an expectation on the part of the student that at the end of the program they will be fully qualified for a particular career.  For example, if the school admits a convicted felon to a security guard training program, and yet the State does not allow for security guards to have a criminal record, that student can apply for loan cancellation.

Loans can also be canceled for a variety of reasons from identity theft to forged loan documents.  The key to remember when seeking loan cancellation is that the cancellation has to be through no fault of the borrower’s and not foreseeable by the borrower.  Other type of loan cancellations relate to loan forgiveness and loan discharge.  These are programs are where the loan is honored and paid off, paid down, or forgiven by employers, through public service, military service or through dozens of other different forgiveness programs.

image

Student Loan Forgiveness

Did you even know this is possible? Well it is in some circumstances so cross you fingers and let’s see if you fit into any of the ways to have all or part of your student loan debt forgiven.

Volunteering

With the Peace Corps you are able to defer payments of Stafford and consolidation loans and you are able to get cancellation of Perkins loan debt.  With the debt cancellation you can get up to seventy percent of the total debt canceled, 15% for each year of peace corps service.  Within the AmeriCorps program you can earn cash, up to $7,400 and a credit of $4,725 toward your student loan debt.  The AmeriCorps program lasts 12 months.  Volunteers in Service to America is a network of non-profit and community organizations where when you complete 1,700 hours of community service you can get $4725 credited toward your student loan debt.

Military Service

Depending on recruitment needs of the various branches of the military you can oftentimes enlist and get a student loan credit.  These programs come and go so you need to discuss them with a local recruiter.  One ongoing program is through the Army National Guard, they have a program where you can earn up to $10,000 in student loan money.  For further information and program eligibility you should seek out a local National Guard recruiter.

Teaching

If you are willing to teach school in certain low income areas you can earn significant credits toward your student loan debt, assuming it is a Perkins loan.  Under this program you can earn a 15% credit for each of your first two years of teaching, a 20% credit for each of your third and fourth years teaching, and a 30% credit for your fifth year teaching.  This is an incredible program that was designed to encouraged talented young teachers to lend their talents to schools that are in need of this type of youthful energy.

In addition to the above there are also many Federal Teaching Student Loan Forgiveness programs for both Stafford and Perkins loans.  The rules are similar to the above but the ways in which to qualifying are much more far reaching than simply teaching in select schools.  If you have the willingness to teach, it may be the best way to get your loans forgiven.

Law & Medical School Debt

There are numerous programs that offer significant medical and legal school debt forgiveness.  These programs are offered by various organizations within the government.  If you have this type of debt and are willing to direct your career in a way that will reward you with debt forgiveness, then you should check into these programs.  Even if you feel that you will not be willing to follow a loan forgiveness path, you should still look into the programs, some of them may be along a path you have already chosen for yourself.

Federal Worker Programs

Many Federal agencies have loan forgiveness programs that are specifically designed to recruit workers into public service.  These programs oftentimes range from $10,000 up to $60,000 in debt forgiveness.  These are programs that are certainly worth looking into especially if you are already planning to work for a Federal agency or department.