Alternative Student Debt Forgiveness Options

As a presidential candidate, Joe Biden promised much-needed student loan debt relief for millions of borrowers and their families.

As the President, he delivered on that promise with an executive order in 2022, providing up to $10,000 in student debt relief for income-eligible borrowers who didn't receive Federal Penn Grants while they attended college and up to $20,000 in student loan debt relief for Pell Grant recipients whose income fell within the program's guidelines.

According to the Education Data Initiative, 42.8 million borrowers hold $1.745 trillion of outstanding student loan debt, with federal loans representing 92.7% or $1.617 trillion of that debt. The average amount of individual student loan debt owed is $37,787.

With the Biden administration's student debt forgiveness program in limbo while it undergoes the legal appeals process, borrowers and their families seek other forms of relief. Depending on the borrower's specific circumstances, there may be alternatives for student loan debt relief, including loan cancellation, discharge, and forgiveness.

What Differentiates Cancellation, Discharge, and Forgiveness?

Loan forgiveness or cancellation describes circumstances when the student loan repayment isn't required for work-related reasons. Student loan discharge applies when repayment isn't necessary for other reasons, such as disability, death, school closure, or fraud. Below are several programs that are available to student and parent borrowers in need of student debt relief.

Student Loan Forgiveness Programs

Public Service Loans

Public service loan forgiveness is available to those who have made at least 120 payments with a qualifying payment plan while working for an employer that is either an eligible non-profit organization or a government entity. Borrowers meeting these criteria will have the balance of their Direct Loans forgiven.

Educators who work for five consecutive years in a low-income elementary or secondary school or with a public educational service agency are eligible to have up to $17,500 of their Direct Loans or Federal Family Education Loan (FFEL) forgiven.

Loan Cancellation and Discharge Programs

Bankruptcy Discharge

In rare instances, Direct Loans, FFELs, and Perkins Loans can be discharged in bankruptcy proceedings.

Borrower Defense Loan Discharge

Borrowers who believe their school engaged in wrongdoing or deceived them in violation of applicable state law may be eligible to have their Direct Loans discharged.

School Closure

Borrowers who took out Direct Loans, FFELs, and Perkins Loans and their school closes at the same time they are actively enrolled or have recently withdrawn from the institution may be eligible to have the total amount of those respective loans canceled.

Perkins Loans Discharge and Cancellation

Perkins Loans may be eligible for discharge under certain circumstances, including personal bankruptcy, school closure, disabled veteran status, permanent and total disability, and for spouses of September 11th victims.

Teachers working in low-income areas for public or non-profit elementary or secondary schools, special education teachers, and teachers working in fields with educator shortages are eligible for 100% Federal Perkins Loan cancellation, provided their employment is full-time.

Permanent and Total Disability

Direct Loan, FFEL, and Perkins Loan borrowers may be eligible for a complete discharge of their loans if they become permanently and totally disabled.

Discharge in The Event of Death

Direct Loans, FFELs, and Perkins Loans are discharged upon the borrower's death.

Unpaid Refund Discharge

If a student receiving a Direct Loan or FFEL withdraws from school and the institution does not refund the lender, the student may qualify for a discharge of the amount the school failed to reimburse.

False Certification Discharge

If a school falsely certified a student's federal loan eligibility, that student could potentially have their loans discharged.

Forgery Discharge

Any loan held by the U.S. Department of Education might qualify for discharge if the loan was approved using forged documents.

PLUS Loan Discharges for Parents

Parents holding PLUS (Parent Loans for Undergraduate Students) loans can have their loans discharged under certain circumstances, such as the death of the borrower or student, the permanent and total disability of the parent, and bankruptcy.

PLUS, loans can also be partially or fully discharged for reasons of forgery, false certification, unpaid refunds, or school closure.

These alternative student debt relief programs may not offer the widespread relief offered by the Biden administration's proposal. Still, they offer a lifeline to borrowers and families who find themselves in the unique situations outlined in each scenario and program.

This article was produced and syndicated by Wealth of Geeks.