Canceling Student Loans

In certain limited circumstances, you may be able to cancel your student loan -- meaning that you no longer have to pay it. Doing this is not easy; you'll have to meet specific conditions depending on the type of loan you have. (See Conditions for Canceling or Deferring Student Loans, below.) In some situations, you won't be able to cancel the entire loan, but you may be able to get rid of a portion of the loan.

To cancel a student loan or to determine if you qualify for cancellation, call your loan holder or the Department of Education's Debt Collection Services Office at 800-621-3115. A customer service representative will send you a cancellation application, which you will have to complete and return with any necessary documentation, such as a statement from a physician describing your disability.

Conditions for Canceling or Deferring Student Loans

The circumstances in which you may be able to cancel or defer a student loan are listed below. Read carefully: Some circumstances qualify you for cancellation only, some for both cancellation and deferment, and still others for deferment only.

Death of the borrower. If a former student borrower dies, the executor -- the person who collects and distributes the property left at death -- can cancel any federal student loan.

Permanent total disability. You can cancel any federal student loan if you are unable to work because of an injury or illness that is expected to continue indefinitely or result in your death. In most cases, you cannot have had the injury or illness when you borrowed the money, unless your condition has substantially deteriorated. To prove total and permanent disability, you'll need a statement from your treating physician on a form provided by the holder of your loan.

Temporary total disability. If you, your spouse, or one of your dependents is temporarily totally disabled, you can defer the payments on most loans obtained before July 1, 1993, for up to three years. The sickness or injury must make you unable to attend school or hold a job for at least 60 days. If your spouse or dependent is sick or injured, you must be unable to hold a job because he or she needs your caretaking for at least three months.

Enrollment in rehabilitation program for the disabled. If you are enrolled in a rehabilitation program for the disabled, you can defer payments on most loans. You must begin making payments six months after your training ends.

Unemployment. You can get a deferment on most loans if you are unemployed but looking for work. You must provide evidence of your eligibility for unemployment benefits or written documentation of your attempts to find a full-time job -- that is, a job for at least 30 hours per week in a position expected to last at least three months.

Economic hardship. You can defer payments on federal loans obtained after June 30, 1993 (though Perkins loans can be from any time period) for up to three years if you are suffering an economic hardship. You are automatically entitled to this deferment if you receive public assistance, such as welfare or SSI. If you don't receive public benefits, qualifying is based on a complex formula that's a mix of your income, the federal minimum wage, the federal poverty level, and your monthly or annual federal student loan payments. You will have to provide documentation of your income, such as pay stubs.

Enrollment in school. If you return to school to study at least half-time, you can almost always defer the payments on your student loans.

Membership in a uniformed service. Former students who currently serve the U.S. government wearing a uniform are grouped together for purposes of loan cancellation and deferment. If you serve in the U.S. military, the National Oceanic and Atmospheric Corps, or the U.S. Public Health Service, there are several situations in which you may cancel or defer your loans. Check with your supervisor or commanding officer.

Teaching needy populations. Teachers who serve certain needy populations -- including low-income or disabled students -- may be able to have their student loans canceled or their payments deferred.

Providing services other than teaching to needy populations. People who do not teach but who serve certain needy populations may be able to have their student loans canceled, depending on the type of loan and population served.

Performing community service. In many situations, you can partially cancel your student loans or defer your payments in exchange for performing community service. Opportunities range from serving in the Peace Corps to volunteering your time with an organization that assists low-income people in your community.

Working in the health care professions. Health care professionals, including nurses and physicians in their residency, sometimes can cancel their student loans or defer their loan payments.