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How can you still legally discharge student debt?

Certain public service positions, and rarer disability or bankruptcy conditions, may qualify a borrower for loan forgiveness.
How can you still legally discharge student debt?
Posted at 2:29 PM, Jun 30, 2023

On Friday the Supreme Court handed down a 6-3 decision that struck down President Joe Biden's plan to forgive up to $20,000 worth of student loan debt per borrower.

But there are certain conditions under which the federal government will still forgive student debt from federal loans.

Public Service Loan Forgiveness

If you work full time for "a U.S. federal, state, local, or tribal government or not-for-profit organization," including for the U.S. military, public schools, or in emergency management; and if you make 10 years of payments on schedule, you can apply to have the rest of your balance forgiven.

If you hold a federal Perkins Loan, you can qualify for forgiveness under similar employment and repayment requirements.

If you have direct loans and teach for five full-time years back-to-back in a low-income school district, you're eligible for forgiveness of up to $17,500.

Other conditions

Federal loans can also be discharged in part or in full:

  • If a borrower can prove a school misled them or violated a state law that governs student loans, or that covers the educational services the school provides
  • If a school falsely approves you as eligible to receive a loan
  • If a school closes while you're enrolled, or soon after you withdraw
  • Or if a school fails to pay a loan refund you are legally entitled to
  • Direct and Perkins loans can also be forgiven in the event of permanent disability, bankruptcy, or death.

    In certain rare cases, a loan may be discharged due to bankruptcy, if the holder can demonstrate in court that repaying the loan would cause undue hardship.

    SEE MORE: Biden blames GOP for 'snatching away hope' of student loan forgiveness

    Following the Supreme Court's decision, President Biden told Americans that his administration will still take steps to soften the impact of restarted payments, and student debt more generally.

    The Secretary of Education is exploring ways that he might use his authority under the Higher Education Act to provide "an alternative path to debt relief for as many working and middle-class borrowers as possible."

    President Biden also promised to provide an "on-ramp" as payments resume, which will temporarily remove the threat of default or hits to credit ratings. From October 1, 2023 to September 30, 2024, borrowers who miss payments won't be reported to credit bureaus or collection agencies. 

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