Get Rid of Debt with Forgiveness, Cancellation, and Discharge

Are you looking to get rid of your debt through debt forgiveness programs, cancellations, or discharges? Well, don’t worry because today, I’ve got you covered.  

There are many debt forgiveness and discharge programs out there. These programs could pay off large portions of your debt or at least help you make monthly payments that don’t break the bank. 

Some programs are related to your profession, some dependent on which organization you work for or school you attended, and others dependent on the length of time you make your monthly payments.

Imagine, having your students loans forgiven and you never having to pay on it ever again.  Amazing, isn’t it?  Feels like a weight has been lifted off your shoulders right?  Think of what you can do once you are finally free from this burden.

If you are struggling to make your monthly payments, don't worry there is help out there.  We’ll look at these programs that hopefully you too can take advantage of.

Here’s a table of all the debt forgiveness programs available by profession:

* Although many programs are geared towards the health professional, in some cases, social workers, counselors, and others are eligible

**Many programs for Doctors and Nurses will often include other health professionals such as Physician Assistants, Psychologist, Substance Abuse counselors etc.

Here's a table of all loan cancellation and discharge programs:

Each program has restrictions as to which loans qualify.  So be sure to check what type of loan you have and make sure you qualify. Private loans do not qualify for many of the programs listed below.

Loan Forgiveness Programs for All

Income-Driven Student Loan Forgiveness

This loan forgiveness program is open to anyone with student loans.  It requires that you sign up for one of their 4 repayment plans and continue to make payments for 20 or 25 years.  After which, your remaining loan balance would be forgiven.

Here are your repayment plans options:

Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness Program (PSLF) is a great program if you qualify.  It is open to anyone who works in the public service sector.  However, qualification is dependent on the company you work for and not your job title.

The best thing about the PSLF is that you can have your loans forgiven after just 120 payments.  Furthermore, the forgiven portion doesn't incur a tax bill!  This is one of the very few programs in which your loans can be forgiven tax free.  

Employer Sponsored Programs

Nowadays, with the competition to attract top talent fierce, some companies are offering loan repayment assistance as a perk.  One place companies are turning to is Gradifi.  This company is helping employers set up benefits for their employees.  There are over 800 companies so far using Gradifi.  

There are different kinds of assistance your employer can provide. Check out a few of them below.

Student Loan Refinancing

Some employers will assist you with having your loans refinanced at the best rates.  This could help lower your APR and your monthly payments.

Matching Contribution Plan

Employers would match what you pay towards your loans.  However, there may be contribution restrictions and the amounts paid to you would be considered taxable income.

Student Loan Repayment Plan

Under this plan, which is usually administered by a separate entity, employers would make payments directly to your loan servicer. Payments are applied directly to the principle.  This can help you save a ton of interest and pay off your loans faster.  Of course, you would still need to continue making your regular monthly payments.

Defined Contribution Plan

Employers make matching contributions to your defined contribution (DC) plan.  Thus, your DC plan would double as both a retirement account and student loan repayment plan.  Furthermore, these employer contributions would be tax free.  Many companies are wary of this approach as it is pretty new.  As of now, only one company offers this.

List of a few employers that offer plans:

** Be careful though as employer contributions could derail your intentions to have your loans forgiven through PSLF or Income Driven Repayment Plans.  Check with your employer.

State Sponsored Forgiveness and Repayment Programs

These programs are generally highly specified.  Check with your local state agency to see which programs are available.  For the most part, they tend to be geared towards health professionals.

Teacher Loan Forgiveness Programs

Teachers are the backbone of every society.  It is only natural that the teachers get a few breaks on all the debt they took on to get there.  After all, they are educating our future generations. 

Check out all the programs available to teachers:

Loan Forgiveness for Doctors and Dentists

Doctors, Dentists, and other health professionals are such a vital part of society.  As such, they have a number of debt forgiveness programs available to them.  Check out the ones below to see the various programs.

Loan Forgiveness for Nurses

Not ones to be left in the dust, nurses are just as heroic as doctors and dentists.  If you’ve chosen to go the nursing route, never fear there are plenty of debt forgiveness and assistance programs for you as well.

Loan Forgiveness for Veterinarians

Veterinarians are the best.  After all, they take care of our cute little fluffies and furballs who get into things they shouldn’t and eat things that most wouldn’t.  With all their hard work, I’d say they definitely deserve a break on the loan front.  

If you are a veterinarian take a look below and see if you can take advantage of any of these money saving programs.

Loan Forgiveness for Lawyers

A society cannot function without the many public defenders, attorneys, and judges that work to provide justice.  So there are plenty of programs to help lawyers pay back the debt they incurred on society's behalf.

List and Award Amounts for State Sponsored Programs

Things to Note:

• Any debt forgiven you have to pay taxes on.
• Loans in default are not eligible for forgiveness programs (but are eligible for discharge programs).  Defaulted loans must be brought back to good standing first (rehabilitated or consolidated). Else-wise you could try student loan settlement or bankruptcy.
•  Check every year to make sure you still qualify for whichever program you choose.  You don't want to get to the end and find out that you do not.
• You need to re-certify every year for the income driven repayment plans, PSLF program, and yearly forgiveness programs.
• Even if you qualify for more than one program, you may not be able to do them at the same time.

Loan Cancellations and Discharges

Did you know that there are certain circumstances under which your loans can be discharged?  If your loans are discharged, you won't have to pay it and you won't owe any taxes.  Furthermore, defaulted loans can be discharged as well.

Closed School Discharge

If you have received loans from your school which later closes making you unable to complete your program, you may be able to have them discharged.  Specifically, you must have been enrolled when the school closed, on approved leave, or had recently withdrawn (within 120 days) to be eligible.

If you completed all the coursework for your program, are enrolled in a "comparable" program at another school, or withdrew more than 120 days before, you are not eligible for discharge.  Talk to your loan provider as there may be exceptions.  Only federal student loans such as Direct Loans, Federal Perkins Loans, FFEL loans and parent PLUS loans are eligible.  

To Apply

To apply you'll need to contact your loan servicer.  You may need to obtain your academic and financial aid records.  Also, check with your servicer to see whether you still need to make payments while they review your application.  

If you are not approved for discharge you may still be able to receive compensation through State Tuition Recovery programs.  These programs vary by state.  You may be able to use these programs to recover private loans and other case expenses.

Total and Permanent disability discharge

For this type of loan cancellation, you must be considered totally and permanently disable.  If you are approved you would no longer have to pay on your Direct, FFEL, or Perkins loans and would not have to complete your TEACH Grant service obligation.

To qualify you must show that you are totally and permanently disabled with appropriate documentation.  If you are approved and your loans are discharged, you are not in the clear yet.  There is a 3 year monitoring period in which you cannot receive: 

• a new federal student loan or TEACH Grant
• another payment from your previous loan or TEACH Grant that you do not return
• an income that is more than the poverty guidelines for a family of two
• a notice from Social Security saying that you are no longer disabled or that your disability review will no longer be the 5 or 7- year period that was previously indicated

Should you receive any of the above your loans will be reinstated. Consequently, you would again be responsible for paying back the loans. However, any interest that would have accrued during the discharge period won't be added. 

To Apply

Discharge in Bankruptcy

Typically, it is very hard to have your student loans discharged in bankruptcy but there are people who have managed to accomplish this feat.  To do this you must prove that making payments on your loans "will impose undue hardship on you and your dependents".

Most courts will probably use the Brunner's Test to determine whether your loans will present undue hardship for you and your dependents.  But even if they do not here is what they typically look for: 

• whether you made an effort to pay on the loans before filing for bankruptcy
• if, in paying the loan, you wouldn't be able to maintain the minimal standard of living
• whether the hardship would continue for a significant portion of the repayment period

Consult a lawyer or other certified professional before filing bankruptcy to weigh the pros and cons of doing so.  One major con is that bankruptcy remains on your record for 10 years.  Not to mention the lawyer fees can get pretty pricey.

To Apply

To "apply" you will need to file for Chapter 7 or Chapter 13 bankruptcy then file a petition requesting an "adversary proceeding" for them to  determine if there is undue hardship in paying back the loans.  If you've previously filed for bankruptcy, you can have the case reopened.  

If the court determines that there will be undue hardships, you may have all or some of your loans discharged.  Or, they may work out a payment plan for you or lower the interest rate.

The student loan borrower's site has some example cases where the courts did in fact discharge the loans if you are interested in checking it out.

False Certification Discharge

If your school falsely certifies you for a loan, you may be eligible for this discharge.  There are 3 categories for false certification:

• Ability to Benefit: If they certify you even though you don't meet the ability-to-benefit requirements (usually testing).
• Disqualifying Status: If at the time of certification, you had a status that would make you unable to get a job in the field of study.
• Unauthorized Signature or Payment: Signing your name without permission and using it for other purposes. 

Parents PLUS loans, Federal Direct loans, and FFEL loans are eligible for this type of discharge.

To Apply

Borrower Defense to Repayment

This discharge is available to anyone who has been misled by their school or whose school has violated certain state laws.  More specifically, the school must have actively violated laws, through an act or omission, related to your school loans or the educational service for which you took out those loans.

If they have engaged in misconduct but it doesn't concern your student loans or your educational program, you are not eligible for this discharge program.

The discharge is only for Direct Loans but if you consolidate your FFEL and Perkins loans under a Direct loan, they too will be eligible.  If you qualify for this discharge, you could have all or some of your loans forgiven.  In addition, they may reimburse you for payments already made.

To Apply

Your loans will be placed in forbearance while they are reviewing your application.  Interest will accrue on your loans while in forbearance.

Unpaid Refund Discharge

Discharge Due to Death

For federal loans, should the borrower pass away, their student loan debt will be discharged.  This is also true for parent PLUS loans where the student, for which the loans were taken, dies or the parent dies.  You would need to submit proof of death.

Even though the loans will be discharged, you would normally be taxed on it.  However, with the Tax Cut and Jobs Act of 2017, you cannot be taxed on it through 2025.

For private loans, you may want to speak to your lender.  Some will discharge the loans upon death.  However, if there is a cosigner, the cosigner would have to pay the remainder of the loan.

If your spouse passes away and you are in a community property state, you may be responsible for paying the private loan if it was taken out after marriage.  You wouldn't be responsible if it was taken out before marriage or you don't live in a community property state.

All in All

There are many ways in which you can get rid of debt legally.  While you may not qualify for all of them, you probably qualify for some.  So use them to your advantage.  And, hopefully, soon you will be one of the people who can say that you too paid off your student loans.  All the best!