Q: I have way more student loan debt than I can handle, and it’s all I can think about. Are there options for canceling my debt?
A: Not knowing how to deal with your debt is painful — and understandable. But there’s hope.
You might already know that loan forgiveness is available to public-sector workers and to those who choose an income-driven repayment plan. You may not know that you can get your loans canceled if your school closed while you were enrolled, it committed fraud, or you’re totally and permanently disabled.
We focus here on federal student loan forgiveness programs because private student loans generally have less flexible repayment options. Your best bet is to contact your lender directly if you’re having trouble making your payments. Also, except in the case of Public Service Loan Forgiveness and in some specific circumstances, you may be taxed on the amount forgiven.
Explore the options below, and check out studentaid.ed.gov for more details.
If your college shutters while you’re enrolled or within 120 days after you leave a program without getting a degree, you can receive a closed school loan discharge , meaning the loans you took out to attend that school will be canceled. Recent closures of for-profit colleges including Corinthian Colleges, ITT Technical Institute and Marinello Schools of Beauty have put this option into the spotlight, says Debbie Cochrane, vice president of the Institute for College Access & Success.
The U.S. Department of Education recently announced automatic loan discharges for borrowers who were enrolled in a school that closed on or after Nov. 1, 2013, and who didn’t re-enroll elsewhere within three years. If your school closed before that period, you can apply for a discharge through your loan servicer. But you’re not eligible if you transferred your credits to a comparable program, Cochrane says, so make sure you meet the specific requirements before applying.
A growing area of loan cancellation is called borrower defense to repayment, a provision of federal law that allows students to seek debt relief because their school committed fraud or misrepresented itself.
