Canceling Your Loans or Postponing Payments

 

If you’ve considered all repayment options and you still can’t pay, all is not lost. In certain limited circumstances, you may be able to cancel your student loans. If you can’t cancel your student loans, you can probably find a way to postpone making payments by obtaining a deferment or forbearance. A deferment is a delay based on a specific condition—such as returning to school or being unemployed—that excuses you from making payments for a set period of time. A forbearance is permission from your loan holder to stop making payments for a set period of time. Forbearances are easier to obtain than deferments because they are not tied to the type of loans you have or the date you obtained them, but they cost more. With a deferment, interest usually stops accruing. Not so with a forbearance. Here are the rules for cancellation and deferment:

 

  • Death of the borrower. If a former student borrower dies, the executor can cancel any federal student loan.

 

  • Permanent total disability. You can cancel any federal student loan if you are unable to work or go to school because of an injury or illness that is expected to continue indefinitely or result in your death.

 

  • Temporary total disability. If you, your spouse or a dependent is temporarily totally disabled, you can defer the payments on most loans for up to three years.

 

  • 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.

 

  • Unemployment. You can defer the payments on most loans, usually for up to three years if you are unemployed but looking for work.

 

  • Economic hardship. You can defer payments on federal loans obtained after June 30, 1993 for up to three years if you are suffering an economic hardship. You are automatically entitled if you receive public assistance. Otherwise, qualifying is based on a mix of your income, the federal minimum wage, the federal poverty level and your monthly or annual federal student loan payments.

 

  • Parents with young children. If you are a working mother or a mother or father on parental leave, you can often defer your student loan payments.

 

  • 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. If you currently serve the U.S. government 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.

 

  • Teaching needy populations. If you teach certain needy populations, including low-income or disabled students, you may be able to have your student loans canceled or the payments deferred. You could get $5,000 of your student loans forgiven if you teach for five years in a low-income community.

 

  • Providing services other than teaching to needy populations. If you serve certain needy populations (in a capacity other than teacher), you may be able to have your student loans canceled or payments deferred.

 

  • 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 as a healthcare professional. If you are a healthcare professional, such as a nurse or a physician in your residency, you may qualify for loan cancellation or deferment.

 

  • Working in law enforcement. Full-time law enforcement and corrections officers can cancel some older Perkins Loans.

 

  • Attended a trade school. Many former students were lulled into taking out student loans to attend a trade school, only to have the school doors close before they could finish the program. Other students were falsely certified by school officials as being able to benefit from the loan. If this happened to you, you can probably cancel 100% of your federal student loan.

To apply for a new repayment plan, cancellation, deferment or forbearance, get in touch with the holder of your loan. If you are not in default, the holder of your loan is where you send your payments. And if the holder of your federal loans changes and you must send your payments to a different place, you must be notified within 45 days. If you are in default, the holder of your loan does not need to notify you when there is a change in where you must send your payments. If you don’t know whom the holder of your loan is, contact either the Department of Education’s Debt Collection Services Office at 800-621-3115 or the Federal Student Aid Information Center at 800-433-3243.