How to Get Out of College Debt: Forgiveness, Discharge, Bankruptcy

There are several legal ways to get out of college debt, and which one fits depends on your job, your health, your school, your income, and whether your loans are federal or private. Federal borrowers have the most options: forgiveness after public service or teaching, income-driven forgiveness after 20 or 25 years of payments, and discharge based on disability, school closure, school misconduct, or bankruptcy hardship. Private loan borrowers have a narrower set of choices built around settlement, the statute of limitations, refinancing, and bankruptcy. The programs below are the current federal routes, including the ones reshaped by legislation and court rulings in 2025 and 2026.

Public Service Loan Forgiveness

Public Service Loan Forgiveness erases your remaining federal Direct Loan balance after 120 qualifying monthly payments while you work full-time for a qualifying employer.¹ The payments don’t have to be consecutive, so job gaps don’t reset the count.

Qualifying employers are federal, state, local, or tribal government agencies and 501(c)(3) nonprofits. AmeriCorps and Peace Corps service also counts. Full-time means averaging at least 30 hours per week over the period you’re certifying.¹

Only Direct Loans qualify. If you still have older Federal Family Education Loans or Perkins Loans, consolidate them into a Direct Consolidation Loan to make them eligible. Payments you made before consolidating generally don’t count, though the regulation allows a weighted average of qualifying payments on pre-existing Direct Loans to carry into the new consolidated loan.¹

Qualifying repayment plans include any income-driven repayment plan, the standard 10-year plan, or any plan with a monthly payment at least equal to the standard 10-year amount. Most borrowers chase PSLF while on an income-driven plan so that a larger balance remains to be forgiven at the end. Submit an employer certification form every year and whenever you change jobs; it documents your count and heads off disputes later. If your forgiveness application is denied, you have 90 days to request reconsideration.¹

The forgiven amount isn’t federal taxable income. That exclusion is permanent in the tax code, not a temporary provision.²

Teacher Loan Forgiveness

Teach full-time for five complete, consecutive academic years at a low-income school or educational service agency, and you can receive up to $17,500 in forgiveness on your Direct Subsidized and Unsubsidized Loans. The $17,500 cap applies to highly qualified math, science, and special education teachers. Teachers in other subjects who meet the same service requirement cap out at $5,000.³

To qualify, you must not have had an outstanding balance on Direct Loans or FFEL loans as of October 1, 1998, or on the date you first borrowed after that date. At least one of your five qualifying years must come after the 1997–98 academic year. Teacher Loan Forgiveness is separate from PSLF, and some teachers use both in sequence: claim the teacher benefit first, then continue toward PSLF on the remaining balance.

Income-Driven Repayment Forgiveness

Income-driven repayment plans set your monthly payment based on income and family size, and forgive any remaining balance after 20 or 25 years of qualifying payments.⁴ Undergraduate-only borrowers reach forgiveness at 240 payments. Any graduate or professional loan in the mix pushes you to 300 payments.

The plan menu changed in 2025 and 2026. The SAVE plan was struck down by the Eighth Circuit Court of Appeals in March 2026 and formally terminated by the One Big Beautiful Bill Act. Borrowers who were on SAVE have been placed in forbearance, which means no payment is due but interest is accruing and the months don’t count toward forgiveness. The same law phases out Pay As You Earn and Income-Contingent Repayment. Income-Based Repayment is still open. A new option, the Repayment Assistance Plan, is scheduled to launch by July 1, 2026, and payments under RAP will count toward PSLF for borrowers who otherwise qualify.⁵ Existing PAYE and ICR borrowers can generally stay on those plans through July 2028 if they don’t take out new loans.

If you were on SAVE, you can switch to IBR now or wait for RAP. The practical point is to get into an active plan rather than sit in forbearance, since forbearance months don’t count toward the 20- or 25-year clock and your balance keeps growing.

The Tax Bill That Can Follow

The American Rescue Plan Act’s temporary exclusion of forgiven student loan balances from federal income tax expired on January 1, 2026. If you receive IDR forgiveness in 2026 or later, the forgiven amount may be treated as taxable income, which can produce a significant one-time tax bill on a large balance. PSLF forgiveness is unaffected and remains permanently tax-free under a separate provision.²

Total and Permanent Disability Discharge

If you’re totally and permanently disabled, your entire federal student loan balance can be discharged. You qualify by submitting one of three types of documentation: a Department of Veterans Affairs disability determination, a Social Security Administration disability finding, or a licensed physician’s certification that you cannot engage in substantial gainful activity due to a condition that has lasted or is expected to last at least 60 months or result in death.⁶

After discharge, you enter a three-year monitoring period. Your earnings must stay below the poverty guideline for a family of two, and you can’t take out new federal student loans. If either happens, the discharge can be reversed and the loans reinstated. Veterans approved through the VA and borrowers approved through Social Security may have different monitoring terms, so check the discharge notice.

Closed School Discharge

If your school closed while you were enrolled, or you withdrew within 180 days before the closure, you’re entitled to a full discharge of the Direct Loans you borrowed for that program. The disqualifier is completing the program somewhere else through a teach-out agreement or at another branch of the same school.⁷

You can apply directly, but in many cases the Department of Education grants the discharge automatically one year after the closure date if its records show you were enrolled and didn’t finish elsewhere. The Secretary can extend the 180-day withdrawal window when exceptional circumstances justify it. If you started a teach-out and didn’t finish it, the one-year automatic clock runs from your last date of attendance in the teach-out program.

Borrower Defense to Repayment

If your school misled you in ways that affected your decision to enroll or borrow, you may qualify for a borrower defense discharge. Typical grounds include false statements about job placement rates, program accreditation, or whether credits would transfer.⁸

The legal standard depends on when your loans were first disbursed. For loans disbursed on or after July 1, 2020, you must show by a preponderance of the evidence that the school made a material misrepresentation you reasonably relied on and that you were financially harmed. For older loans, the standard ties to state law that would have given you a claim against the school.⁸

Only federal Direct Loans qualify, though FFEL and Perkins loans can be consolidated into a Direct Consolidation Loan to become eligible. Private loans are not covered.⁹ Processing has been slow: under the Sweet v. McMahon settlement, the Department of Education faced a January 2026 deadline to clear a backlog of more than 250,000 applications and reviewed only about 60,000. Applicants whose claims weren’t decided by the deadline may be entitled to full relief under the settlement terms, though the Department has sought to delay implementation. Filing the application puts you in line even when adjudication takes time.

Bankruptcy Discharge

Student loans survive bankruptcy by default. To wipe them out, you have to show that repaying would impose an “undue hardship” on you and your dependents.¹⁰

Most courts apply the Brunner test, which requires three findings: you can’t maintain a minimal standard of living if forced to repay, the hardship is likely to persist for a significant portion of the repayment period, and you’ve made good-faith efforts to repay. Some courts, including in the Eighth Circuit, use a broader totality-of-the-circumstances approach. Which standard applies depends on where you file.

You can’t just list the loan in a regular bankruptcy case. You have to file a separate lawsuit within the bankruptcy, called an adversary proceeding, challenging the student loan debt. In 2022 the Department of Justice and Department of Education introduced a standardized process for federal loan borrowers.¹¹ You fill out a detailed attestation covering income, expenses, assets, and repayment history, with your spending measured against IRS Collection Financial Standards. The Department of Justice uses your responses to decide whether to recommend discharge rather than oppose it.¹²

Bankruptcy is still a last resort. It means hiring an attorney, paying court fees, and going through a formal proceeding. But for borrowers who truly can’t repay and don’t fit any of the forgiveness or discharge programs, the path is more defined than it used to be.

Service-Linked Repayment Programs

Several federal programs pay down loans in exchange for a service commitment. The Nurse Corps Loan Repayment Program pays up to 85% of qualifying nursing education debt for service at a facility with a critical shortage of nurses: 60% of your outstanding balance over a two-year commitment, with another 25% available for a third year.¹³ Similar programs exist for physicians, dentists, and mental health providers who work in Health Professional Shortage Areas, and many state bar foundations fund loan repayment for attorneys in public interest or legal aid roles. Each requires a signed service contract, and leaving before the commitment ends means paying back what you received.

What About Private Student Loans

None of the federal forgiveness or discharge programs above apply to private student loans. Private lenders aren’t required to offer income-driven repayment, forgiveness timelines, or disability discharge, so your options are narrower.

If you’ve defaulted, the lender can no longer sue to collect once the statute of limitations expires. The time period varies by state and typically runs from your last payment or the date of default.¹⁴ Settlement is possible when a loan is significantly delinquent; some lenders will take a lump sum for less than the full balance, though results vary by lender and by whether the debt has been sold to a collector. Any forgiven amount in a private settlement may count as taxable income.

Private loans can also be discharged in bankruptcy under the same undue hardship standard that applies to federal loans. Refinancing with another private lender at a lower rate can bring the monthly cost down if your credit has improved, but it won’t reduce the principal.

1
eCFR. 34 CFR 685.219 – Public Service Loan Forgiveness Program (PSLF)
2
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
3
Federal Student Aid. Teacher Loan Forgiveness and Cancellation
4
eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
5
Federal Student Aid Partners. Federal Student Loan Program Provisions Effective Upon Enactment Under One Big Beautiful Bill Act
6
eCFR. 34 CFR 685.213 – Total and Permanent Disability Discharge
7
eCFR. 34 CFR 685.214 – Closed School Discharge
8
eCFR. 34 CFR 685.206 – Borrower Responsibilities and Defenses
9
Federal Student Aid. Borrower Defense
10
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
11
Department of Justice. Justice Department and Department of Education Announce Continuing Success of Student-Loan Bankruptcy Discharge Process
12
Department of Justice. Student Loan Attestation Fillable Form
13
Health Resources and Services Administration. Apply to the Nurse Corps Loan Repayment Program
14
Consumer Financial Protection Bureau. What Happens if I Default on a Private Student Loan