Loan Cancellation Discharge and Loan Forgiveness: Know Your Rights and What Happens Next

Not everyone is eligible for a loan cancellation, but there are several methods by which the process can be done. Here are a few simple instances where a loan cancellation is possible. Make sure that you check with the current rules and regulations regarding this process, because government regulations are liable to change at any time.

Bankruptcy

Bankruptcy does not automatically free you from paying loans. Loans are no longer payable in the case of bankruptcy, but this is dependent on a range of clauses. For example, students who declare bankruptcy do not need to pay back the loan if they can demonstrate hardship on themselves and their family. You will require a legal professional to fight the case in court for you.

Total or Permanent Disability

If the holder of the loan can demonstrate that they have become completely disabled, the endorser of the loan and the payee both become free of the loan repayment process. The loan holder will require verification from an independent doctor or hospital to confirm the fact that the borrower is completely disabled and will not be able to attend work or school because of the impairment.

Teachers

Teaching professionals who have finished teaching for five years and have a permanent job in a school or college are eligible for loan forgiveness. If you have the expertise and the degree, you will be offered the option of teaching in low income communities, and you will also be paid about $5,000 to pay off any existing loans. Learn about the Teacher Loan Forgiveness Program for more information on the same. If you're employed as a secondary or an elementary school teacher, you will have a portion of your Federal Perkins Loan forgiven, and Stafford loan forgiveness is also possible. For this you will have to get in touch with the local school district administrator for additional information.

Social Work

Volunteering for social work full time or working in a social service center ensures that you will be eligible for a loan forgiveness program. Volunteering for the National Health Service Corps, which is a branch of the US government, is also another process by which you can reduce your loan amounts. Enrolling for the program can get you as much as $25,000 deducted off your loans. This is especially applicable to medical and legal professionals who volunteer to work in low-income communities.

Tips

Even though most of these programs offer a form of loan reduction, there is always a catch. For example:

• Volunteering for the Peace Corps will reduce your loans by as much as 15% yearly, which can be up to a maximum of 70%. This is applicable only on government loans and not on private loans and credit card loans.
• Loans have to be paid every year. A few charity organizations will only pay out at the end of your service period, which will increase your interest payments.
• A few programs may collapse due to no financial aid from the government, and you will end up doing the service and getting nothing in return. Check the financial viability of the program and keep a track of government rulings about your project or charity.