Designed for undergraduate and graduate students with extraordinary financial need, Federal Perkins Loans were low-interest student loans. Many borrowers are still paying back these loans even though the program ran through 2017. Should you have a Federal Perkins Loan, depending on specific criteria you could be qualified for discharge or cancellation. Here’s what you should know.
What is Loan Cancellation?
Loan cancellation lets qualified borrowers have their Federal Perkins Loan forgiven either partially or whole depending on qualifying work or volunteer activity. Usually, people in particular professions or service sectors have this option available.
Eligible Professions and Services Include:
- Teaching: Full-time teachers in low-income schools, special education teachers, and those in high-demand subjects like math, science, and foreign languages.
- Healthcare Professionals: Full-time nurses or medical technicians providing essential health services.
- Law Enforcement: Full-time law enforcement officers, correctional officers, or public defenders.
- Firefighters: Full-time firefighters serving in a public service role.
- Military Service: Members of the U.S. Armed Forces serving in areas of hostility or imminent danger.
- Volunteers: Full-time Peace Corps or AmeriCorps VISTA volunteers.
Each qualifying year of service can lead to a specific percentage of loan cancellation, structured as follows:
- 15% for the first and second years
- 20% for the third and fourth years
- 30% for the fifth year
Loan Discharge Options
Under some conditions, your Federal Perkins Loan could be released, therefore relieving you of obligation to pay back the outstanding loan total. The main discharge choices are:
1. Total and Permanent Disability Discharge
If you become totally and permanently disabled, you may qualify for a discharge. You will need to submit documentation of your disability and complete the application available here:
https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge.
2. Death Discharge
If a borrower dies, the loan will be fully discharged. The borrower’s family or representative must provide a death certificate to the loan servicer.
3. Bankruptcy Discharge
In rare cases, Perkins Loans can be discharged in bankruptcy if the borrower can prove undue financial hardship. Learn more about this option here:
https://studentaid.gov/manage-loans/forgiveness-cancellation/bankruptcy.
4. School Closure Discharge
If the school you attended closed while you were enrolled or soon after you withdrew, you might qualify for a discharge. Further information can be found here:
https://studentaid.gov/manage-loans/forgiveness-cancellation/closed-school.
5. False Certification Discharge
If your school falsely certified your eligibility for a Perkins Loan, you may be eligible for discharge. Details and application forms are available at:
https://studentaid.gov/manage-loans/forgiveness-cancellation/false-certification.
6. Unpaid Refund Discharge
If you withdrew from school and the institution failed to return loan funds to the lender, you may be eligible for a discharge of the unpaid refund amount. For more information, visit:
https://studentaid.gov/manage-loans/forgiveness-cancellation/unpaid-refund.
How to Apply for Cancellation or Discharge
- Contact Your Loan Servicer:
Reach out to your school or loan servicer to obtain the necessary application forms. - Complete the Application:
Fill out the appropriate cancellation or discharge application, including all required documentation. - Submit Supporting Documents:
Attach all necessary proof of employment, service, or specific circumstances that qualify you for discharge or cancellation. - Continue Making Payments:
You must continue making payments on your Perkins Loan until you receive confirmation of discharge or cancellation approval. - Await Decision:
The loan servicer will review your application and notify you of the decision.
Important Considerations
- Timely Applications: Apply as soon as you are eligible to prevent loan default.
- Documentation: Keep copies of all submitted forms and correspondence for your records.
- Tax Implications: Some discharge amounts may be considered taxable income. Consult a tax advisor for more information.
Understanding your options for Federal Perkins Loan discharge or cancellation can significantly impact your financial future. Explore the official resources and apply for eligible programs to reduce or eliminate your student loan debt.
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FAQ
Can I Apply For Multiple Loan Discharges?
Yes, you can apply for multiple discharge types if you qualify for each. However, only one discharge type can be processed at a time.
How Long Does The Discharge Process Take?
The discharge process duration varies based on the discharge type and completeness of documentation. Generally, it can take several weeks to a few months.
Are Discharged Loans Taxable Income?
In some cases, discharged loans may be considered taxable income. Consult a tax advisor or review IRS guidelines to understand potential tax implications.
Can I Appeal A Denied Discharge Application?
Yes, you can appeal a denied application. Contact your loan servicer for specific instructions and required documentation to initiate the appeal process.
Does Loan Discharge Affect My Credit Score?
Loan discharge may impact your credit report, but it is generally reported as “paid in full.” Confirm details with your loan servicer for specific credit implications.
What Happens If My School Closes Mid-Term?
If your school closes while you’re still enrolled, you may qualify for a full discharge. Contact your loan servicer to initiate the application and review eligibility criteria.
