2020 Best Invention

Perkins Loan Cancellation and Discharge

3 minute readUpsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool


In a Nutshell

Federal Perkins Loans are federal subsidized loans that were made to students with exceptional financial need. The federal government allocates the funds for these loans to participating schools. These loans were originated and are serviced by the schools themselves. Though there are many Perkins Loans still outstanding, the U.S. Department of Education stopped allowing new loans under this program after 9/30/2017. The final disbursements allowed were through 6/30/2018.

Written by Attorney John Coble.  
Updated January 6, 2021


Federal Perkins Loans are federal subsidized loans that were made to students with exceptional financial need. The federal government allocates the funds for these loans to participating schools. These loans were originated and are serviced by the schools themselves. Though there are many Perkins Loans still outstanding, the U.S. Department of Education stopped allowing new loans under this program after 9/30/2017. The final disbursements allowed were through 6/30/2018. 

Though other federal student loans have teacher cancellation and public service loan forgiveness programs, the Perkins Loan forgiveness programs forgive a larger portion of your loan in less time. If you're eligible for Perkins Loans cancellations, it's probably a bad idea to consolidate the Perkins Loan with other federal loans. Doing so would prohibit you from taking advantage of the federal Perkins Loan cancellation programs.

Perkins Loan Forgiveness/Cancellation Programs

Are you, the borrower, eligible for Perkins Loans teacher or public service forgiveness? If eligible, how much of your loan will be forgiven? The following list of professions that meet the eligibility requirements is not complete. Even if not on the list, you may be a teacher for a subject where there is a designated teacher shortage area. See this database for these designated shortage jobs.

The teaching jobs that will allow cancellation of your Perkins Loans include:

  1. A full-time teaching position in a public or non-profit elementary or secondary school that

    1. serves students from low-income families; or

    2. special education teacher, including teachers of infants, toddlers, children, or youth with disabilities; or

    3. A teacher in the fields of mathematics, science, foreign languages, or bilingual education, or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state.

The next question to ask is did your job meet the definition of a "teacher" as prescribed under the Perkins Loans cancellation rules? A school librarian or guidance counselor may be considered a teacher. You don't need certification or a license to be considered a teacher as long as your school system considers you a full-time teacher. You're considered a teacher if your primary job function provides direct and personal educational services to students. For this reason, administrators, researchers, and some other jobs are not considered "teachers." The final determination is based on the written job description of the position. 

A special education teacher includes those who provide special services for special education students. For these special service positions, you must be certified or licensed by the appropriate state agency. These positions include:

  • Language and speech pathologist and audiologists

  • Physical therapists

  • Occupational therapists

  • Psychological and counseling services

  • Recreational therapists

These teaching positions allow cancellation of large parts of your Perkins Loans for each year of full-time service. For the first and second year, 15% of your Perkins Loans can be canceled each year. For your third and fourth years, 20% of your Perkins loans can be canceled each year. For your fifth year, 30% of your Perkins Loans can be canceled. Therefore, with only 5 years of qualified teaching, you can cancel 100% of your Perkins Loans. 

This is much better than other federal loans. For example, the Direct Loans public service forgiveness program requires loan repayment for ten years before they're forgiven. Direct and FFEL loans only forgive up to $17,500.00 for their teacher forgiveness program.

There are many other public service jobs that may qualify you for the cancellation of your Perkins Loans. The table below is a list along with the potential cancellation percentage and time required.

PositionTime Required for full CancellationMaximum Amount Cancelled
Full-time nurse or medical technician5 Years100%
Full-time firefighter for service on or after 8/14/20085 Years100%
Full-time faculty member at a tribal college or university for service on or after 8/14/2008. These tribal schools are the only form of post-secondary teaching eligible for cancellation.5 Years100%
Full-time law enforcement or corrections officer5 Years100%
Full-time attorney employed in a federal public defender or community defender organization for service on or after 8/14/20085 Years100%
Full-time employee of a public or nonprofit child- or family services agency providing services to high-risk children and their families from low-income communities and professional provider of early intervention services5 Years100%

The list in this table isn't all inclusive. For example, a librarian with a master's degree working in a public library or a teacher at an educational service agency is eligible for Perkins Loan cancellation. A more complete list is available at studentaid.gov.

For positions that require five years for full cancellation, the schedule of cancellation is the same as for teachers over five years. For positions that require seven years for the maximum cancellation, the schedule is 15% for each of the first six years and 10% for the seventh year. For the 70% cancellation for Peace Corps and Americorps, the schedule is 15% for each of the first two years and 20% for each of the last two years.

Applications to have your Perkins Loans forgiven (canceled) are submitted to your school. This is because, unlike other federal loans, the school is the loan holder for loans made through the Perkins Loan program. 

Perkins Loan Discharges

The types of discharge available for federal Perkins Loans are bankruptcy, closed school, death, and disability discharge.

Perkins Bankruptcy Discharge

In most states, discharges in bankruptcy must meet the requirements of the Brunner Test for undue hardship to be discharged in bankruptcy. The Brunner Test requires you, the student loan borrower, to prove: 

  1. Based on your current income, you can't maintain a minimal standard of living for you and your dependents while repaying your student loans, and 

  2. Your financial situation isn't likely to improve for a significant portion of the loan repayment period, and 

  3. You have made a good faith effort to repay your student loans. 

Most attorneys believe this is an almost impossible test to pass unless there is a permanent disability involved. However, in the past year, two different courts have eased the nature of this test. Student loans that were once seen as nondischargeable in bankruptcy have been fully or partially discharged.

Conclusion

Perkins Loans cancellations are still available to those with Perkins Loans. If you work in a qualifying job, you should take advantage of these opportunities to have your Perkins Loans completely forgiven in as little as five years. If you don’t work in one of the qualifying professions, you can still discharge your Perkins Loan if you are permanently disabled or if your school closes before you complete your course of study. In some rare cases, your Perkins Loans can be discharged in bankruptcy.



Written By:

Attorney John Coble

LinkedIn

John Coble has practiced as both a CPA and an Attorney. John's legal specialties were tax law and bankruptcy law. Before starting his own firm, John worked for law offices, accounting firms, and one of America's largest banks. John handled almost 1,500 bankruptcy cases in the eig... read more about Attorney John Coble

It's easy to get help

Choose one of the options below to get assistance with your bankruptcy:

Free Web App

Take our screener or read our bankruptcy F.A.Q. to see if Upsolve is right for you.

Take Screener
6,098 families have filed with Upsolve! ☆
or

Private Attorney

Get a free bankruptcy evaluation from an independent law firm.

Find Attorney

Bankruptcy Learning Center

Research and understand your options with our articles and guides.

Go to Learning Center →

Already an Upsolve user?

Read Support Articles →

News

    + Show Articles

    Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can’t access their basic rights when they can’t afford to pay for help. Combining direct services and advocacy, we’re fighting this injustice.

    To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.

    Close

    Considering Bankruptcy?

    Try our 100% free tool that thousands of low-income families across the country have used to file bankruptcy themselves. We are funded by Harvard University, will never ask you for a credit card, and you can stop at any time.

    File Bankruptcy for Free