Cancellation of Loan

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Statutory discharges (or cancellations) provide the most powerful remedies for federal student loan borrowers. They offer complete relief as opposed to simply delaying the repayment obligation. After a cancellation, the borrower no longer owes anything on the loan and becomes eligible for new student loans and grants. In some cases, borrowers are also entitled to refunds of past loan payments, deletion of all negative references on their credit records, and renewed eligibility for federal financial aid.

Loan cancellation (also called “discharge”) is the most complete way to deal with a student loan. Although limited, cancellations for federal loans are required by law. In some cases, you can cancel a loan due to serious problems with the school you attended. This is not a general cancellation simply because you didn’t like your school. You must meet the specific criteria of the school-related discharge. Other cancellations are available if you work for a certain period of time in a public service job. This includes military service members. Another category is for borrowers with serious disabilities or after a borrower dies so that the debt is not passed on to the borrower’s estate. You cannot get these cancellations automatically. You must apply for loan cancellation using the proper government forms.
Student Loan Borrower Assistance