Discharge and Cancellation

Loan Discharge and Cancellation on FFELP and Direct Loans. In very rare cases, it is possible to obtain a discharge or cancellation from your FFELP or Direct Loan repayment obligation. But your loan will not and cannot be discharged or cancelled because, for example, you did not: (a) complete the program of study at the school (unless you could not complete because the school closed); (b) like the school or program of study; or (c) obtain employment in your chosen field.

Discharge refers to the total extinguishment of the student loan debt. Generally a Direct or FFELP Loan may be discharged (without a law suit) if the school closes, the loan was falsely certified or the borrower dies or becomes totally and permanently disabled. Total and permanent disability refers to the inability to work and earn a living because of an illness or injury that is expected to continue indefinitely or result in death.

Cancellation generally refers to the extinguishment of a part of the student loan debt. Cancellation is based on the borrower performing a certain type of service in exchange for the cancellation such a teaching in a school that serves low-income families. However, the entire loan amount may be cancelled before the loan proceeds are disbursed to the borrower. After the loan is disbursed, the borrower may cancel all or part of the loan within certain time frames. The promissory note explains those time frames and the necessary steps to follow.