Student loan discharge is the cancellation of a federal student loan balance based on a specific qualifying event, independent of repayment history or employment. Unlike forgiveness programs (which require years of payments), discharge typically occurs because of circumstances beyond the borrower's control.
30 steps across 4 sections
1. Closed School Discharge
- Determine eligibility. You may qualify if:
- You were enrolled when the school closed, OR
- You withdrew within 180 days before the school closed
- You did not complete your program of study through a teach-out agreement at another school
- Check for automatic discharge. The Department of Education may initiate automatic discharge for eligible borrowers without requiring a separate application. Check studentaid.gov for notifications.
- Apply if not automatically discharged. Contact your loan servicer and submit the Closed School Loan Discharge Application with documentation of your enrollment dates.
- Receive 100% discharge. If approved, the full loan amount associated with the closed school enrollment is discharged and any payments made are refunded.
2. Total and Permanent Disability (TPD) Discharge
- Determine eligibility. You qualify through one of three documentation pathways:
- Certification from a licensed physician (MD or DO) that you are totally and permanently disabled
- Social Security Administration (SSA) disability determination (SSI or SSDI)
- Veterans Affairs (VA) disability rating of 100% or individual unemployability determination
- Apply at disabilitydischarge.com. Submit the TPD Discharge Application with supporting documentation.
- Enter the monitoring period. After approval, there is typically a 3-year post-discharge monitoring period during which you must:
- Report income annually
- Not earn above the federal poverty guideline threshold
- Not receive new federal student loans
- Receive final discharge. After the monitoring period, discharge becomes permanent. (Note: VA-documented discharges may skip the monitoring period.)
3. Bankruptcy Discharge
- Understand the standard. Discharging student loans in bankruptcy requires:
- Filing for Chapter 7 or Chapter 13 bankruptcy
- Filing a separate adversary proceeding within the bankruptcy case
- Proving "undue hardship" (most courts use the Brunner test)
- Demonstrate undue hardship. The Brunner test requires showing:
- You cannot maintain a minimal standard of living while repaying loans
- Your financial situation is likely to persist for a significant portion of the repayment period
- You have made good-faith efforts to repay the loans
- File the adversary proceeding. Work with a bankruptcy attorney to file the complaint and present evidence to the court.
- Receive court determination. The judge decides whether to discharge all, part, or none of the student loan debt.
4. Other Discharge Types
- Death discharge: Loans are discharged upon the borrower's death (or the student's death for Parent PLUS Loans). The loan servicer requires a death certificate.
- False certification discharge: If the school falsely certified your eligibility for the loan, enrolled you in a program you could not complete due to physical/mental condition, or forged your signature.
- Unpaid refund discharge: If the school did not return loan funds it was required to return.
Common Mistakes
- Not checking for automatic closed school discharge
- Assuming bankruptcy cannot discharge student loans
- Not applying for TPD discharge after receiving a disability determination
- Failing to comply with the TPD monitoring period
- Not seeking legal help for bankruptcy discharge
Pro Tips
- Check the Department of Education's closed school database
- VA-rated veterans should apply immediately
- Document your disability thoroughly
- Consult a bankruptcy attorney about the new DOJ guidance
- Tax implications may apply