On August 24, 2022, President Biden announced widespread student debt cancellation of up to $20,000 for eligible borrowers. For information about the new one-time student loan cancellation, visit our page here. The application for this one-time debt cancellation is available on the Department of Education’s website here. Thank you for your patience as we update our website about these major changes.
In the meantime, you can visit studentaid.gov for information about managing your federal student loans from the U.S. Department of Education, including information about the payment pause and debt cancellation.
Although loan cancellation is a limited option, it is the most complete way to deal with student loan debt. This means that it’s a good idea to review the various cancellation programs to see if you qualify. This section discusses ways to cancel or discharge loans outside of bankruptcy. In rare cases, it is also possible to discharge student loans through bankruptcy.
Although limited, cancellations for federal loans are required by law. Private loans are another story. Unless the private lender made a promise about a cancellation program, private lenders MAY cancel loans, but they usually don’t have to. It certainly can’t hurt to ask your private lender about loan cancellation programs.
As you review the various cancellation options, keep in mind that you may get a tax bill if your loan is cancelled. Some of the government cancellation programs result in taxable income and some do not. You should consider discussing this with a tax professional.
Settlement is not always easy for student loans. But it is worth considering a settlement, especially if you have a fairly large lump sum to offer. It can be difficult, however, to negotiate this type of deal. The government has some guidelines for settlement of federal student loans. Private loan settlement is generally at the discretion of the private lender.