Quick overview

Student loan discharge options let eligible borrowers eliminate federal student loan balances when particular criteria are met. These discharges are different from routine forgiveness programs (like Public Service Loan Forgiveness) or negotiated settlements; they are administrative remedies tied to events such as permanent disability, school closure, or institutional misconduct. In my practice advising borrowers for 15+ years, I’ve seen discharge options materially change life outcomes—especially for borrowers hit by medical crises or who attended closed or fraudulent schools.

Types of federal student loan discharges (what you need to know)

Below are the most common federal discharge pathways and the key eligibility triggers:

  • Total and Permanent Disability (TPD) discharge: For borrowers with disabilities confirmed by the Social Security Administration, the U.S. Department of Veterans Affairs, or a physician’s certification. See StudentAid.gov for current forms and instructions (https://studentaid.gov/).
  • Closed school discharge: If your school closed while you were enrolled or within a short window after you withdrew, loans used for that program may be discharged. (More detailed guidance and application steps are available in our internal guide on applying for closed-school discharge.)
  • Borrower Defense to Repayment: If your school misled you or engaged in unlawful conduct (fraud, false claims about job placement or accreditation), you can apply to have loans discharged based on borrower defense.
  • Death discharge: Federal student loans are discharged when the borrower dies; parent PLUS loans may be discharged upon the borrower’s or student’s death when appropriate documentation is filed.
  • Military and service-related discharges: Certain discharges or cancellations are available for servicemembers (for example, Total and Partial Unpaid Care or separate combat-related discharge programs).
  • Administrative discharges: These include false certification, unpaid refunds, or other Department of Education administrative actions.
  • Bankruptcy-related discharge: Rare and difficult, but possible through an adversary proceeding showing undue hardship in bankruptcy court.

For more on the disability-specific pathway, see our related article: Student Loan Discharge Due to Total and Permanent Disability (https://finhelp.io/glossary/student-loan-discharge-due-to-total-and-permanent-disability/). For closed-school procedures, see Applying for Closed-School Student Loan Discharge: Step-by-Step (https://finhelp.io/glossary/applying-for-closed-school-student-loan-discharge-step-by-step/).

Eligibility and documentation — what you’ll actually need

Documentation requirements vary by discharge type. Below are common documents and steps I tell clients to gather before applying:

  • TPD discharge:

  • SSA determination letter showing entitlement to Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) that includes a medical-vocational allowance, OR

  • VA documentation showing individual unemployability benefits, OR

  • A physician’s certification using the Department of Education’s TPD form.

  • If approved, you must certify income-earning status during a three-year monitoring period in many cases for loans discharged under previously applied rules.

  • Authoritative source: Social Security Administration and StudentAid.gov (https://www.ssa.gov/, https://studentaid.gov/).

  • Closed school discharge:

  • Proof of enrollment dates, program attended, and the school’s closure notice or published closure date. Applications are submitted to your loan servicer or directly through the Department of Education process.

  • Typical timeframe: You generally qualify if the school closed while you were enrolled or within 120 days after you withdrew; this timeframe can vary.

  • See our closed-school application guide for step-by-step instructions: Applying for Closed-School Student Loan Discharge (https://finhelp.io/glossary/applying-for-closed-school-student-loan-discharge-step-by-step/).

  • Borrower Defense to Repayment:

  • A detailed statement describing how the school misled or committed misconduct, supporting documents (recruiter materials, emails, program descriptions), and any state complaints or attorney general findings.

  • The Consumer Financial Protection Bureau (CFPB) and Department of Education maintain guidance on borrower defense procedures (https://www.consumerfinance.gov/).

  • Death discharge:

  • Death certificate for the borrower (and/or student when parent PLUS loans are involved). Submit directly to your loan servicer.

  • Bankruptcy-related discharge:

  • File an adversary proceeding in bankruptcy court; you must prove undue hardship using the Brunner or equivalent test (high evidentiary bar).

  • Important: bankruptcy discharge of student loans is uncommon and often requires experienced counsel.

How to apply — step-by-step approach

  1. Identify the correct discharge pathway and gather documentation before contacting your servicer.
  2. Complete the Department of Education or servicer-specific form associated with the discharge type (TPD form, closed-school application, borrower defense form).
  3. Submit the application, keep meticulous records (dates, chat logs, copies of forms), and request confirmation receipts from your servicer.
  4. Respond promptly to any requests for additional documents or clarification. Delays often come from missing paperwork.
  5. If denied, review the denial letter carefully—denials will list reasons and appeal instructions. Many denials can be successfully appealed with additional or corrected evidence.

In my practice, well-prepared applications (with clear, dated evidence) get approved faster and with fewer follow-up requests.

Timelines and outcomes

Processing times vary by type and complexity:

  • TPD discharge: often processed within 30–90 days once complete documentation is received, but monitoring periods or servicer backlogs can extend this.
  • Closed school discharge: commonly 30–120 days depending on how complete your documentation is and whether the Department needs to confirm closure records.
  • Borrower defense: can take several months to more than a year for complex claims.
  • Bankruptcy: timeline follows the bankruptcy court schedule and adversary proceeding docket; outcomes are uncertain.

These are general ranges; check your loan servicer and StudentAid.gov for updates (https://studentaid.gov/).

Tax implications (2021–2025 special rule and beyond)

Under the American Rescue Plan Act of 2021, certain discharges of qualified student loans are excluded from gross income for federal tax purposes from January 1, 2021 through December 31, 2025. That means many discharges during that period should not generate federal income tax liability. However:

  • State tax rules vary—some states may still treat discharges as taxable income.
  • The exclusion may not apply to every type of discharge; consult IRS guidance and your tax advisor when you receive a discharge.
  • Authoritative resources: IRS and Treasury (https://www.irs.gov/) and StudentAid.gov (https://studentaid.gov/).

Because tax law changes, verify the current federal and state tax treatment in the year your discharge occurs.

Credit reporting and other effects

  • Discharge typically removes the loan balance and the obligation to pay—but past delinquencies already reported may remain on credit reports for up to seven years and can continue to affect your credit history.
  • If a discharge leads to a 1099-C (cancellation of debt) in certain years, that could have been taxable historically; see tax note above.

Common mistakes I see and how to avoid them

  • Waiting to document everything. Start collecting medical records, enrollment paperwork, and communication logs immediately.
  • Applying to the wrong discharge category. Read forms carefully; borrower defense and closed-school claims are separate tracks.
  • Missing appeals. If you’re denied, take action—many borrowers succeed after submitting clearer evidence.

When to get professional help

Consider a student loan attorney, accredited financial counselor, or a nonprofit legal aid program if:

  • Your borrower defense claim is complex or your school is part of a larger state or federal investigation.
  • You’re pursuing discharge through bankruptcy.
  • You need help documenting a TPD application or appealing a denial.

I frequently refer clients to experienced consumer law attorneys for complex borrower defense or bankruptcy-adversary proceedings.

Frequently asked questions (short answers)

  • Will private student loans be discharged? Usually not — private lenders rarely discharge loans for disability or school closure; check your promissory note and lender policies.
  • Do I have to pay taxes on a discharged loan? Likely excluded federally through 2025 due to the American Rescue Plan Act, but confirm state treatment and current IRS guidance.
  • How long does the closed-school discharge take? Typically 30–120 days if your documentation is complete.

Final checklist before you apply

  • Gather all supporting documents and keep copies.
  • Read the specific discharge instructions on StudentAid.gov and your loan servicer’s site (https://studentaid.gov/).
  • Prepare a clear, dated narrative explaining your claim for borrower defense or circumstances surrounding a school closure.
  • Consider professional help if the case is legally complex.

Authoritative sources and further reading

Internal resources on FinHelp.io:

Professional disclaimer: This article is educational only and not legal or tax advice. Your situation may require tailored legal or tax guidance—consult a licensed attorney or tax professional before making decisions.

If you want, I can prepare a short checklist or template for a TPD or closed-school application based on your loan type and state.