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It’s important to note that loan cancellation is not the same as bankruptcy.
Here’s a bit more detail about school-related circumstances that can provide potential eligibility for loan cancellation: School closure You can apply for loan cancellation if you attended a school that closed while you were enrolled, or if you withdrew 120 days before the school’s closure and you were unable to complete the educational program due to the closing.
It’s important to find out if consolidation is best for you.
For example, if you only have a Federal Family Education Loan or Perkins Loan, that means you’re not eligible for Public Service Loan Forgiveness — but if you consolidate it into a Direct Consolidation Loan, you are.
If you don’t want to make three voluntary payments, you can still consolidate your loans if you agree to enter into an income-driven repayment plan. To rehabilitate a federal student loan, you and the Department of Education must reach an agreement on a “reasonable and affordable” repayment plan in which you’ll have to make nine out of 10 on-time payments.
Any garnished wages, tax returns or social security earnings will not count toward these payments.
Student loan cancellation is often limited to very specific situations, but in those situations, the option is required by federal law to be available to debtors.
You may not cancel your student loan based on dissatisfaction with your college, the degree you received or your job placement prospects after graduation.
Typically, consolidation is the best option of getting out of default quickly, as you’re able to move directly into an Income-Driven Repayment plan and can immediately start building credit towards Public Service Loan Forgiveness if you’re eligible.
You can consolidate into a Direct Consolidation Loan, even if you only have one federal student loan.
Consolidation can be a good option for getting out of default, as long as you’re able to commit to the repayment plans it requires.
Unpaid refund You can apply for unpaid refund loan cancellation if you left school early.
If you went to school for less than 60 percent of the loan repayment period, you should have received a refund for at least some of what you borrowed.