Loan Repayment & Forgiveness

You are generally required to repay your student loan, but in certain situations, your loan may be forgiven, canceled, or discharged. There are State and Federal programs available to potentially discharge or forgive all or a portion of your federal student loan debt, if you meet specific qualifications. In addition, Montana has several loan repayment incentive programs, funded through the Legislature, that are focused at assisting with student debt relief related to Medical Education. These include the Montana Rural Physician Incentive Program (MRPIP) and the Montana Institutional Nursing Incentive Program (MINIP). 

Loan Forgiveness, Cancellation, and Discharge

The terms forgiveness, cancellation, and discharge mean nearly the same thing, but they’re used in different ways. If you’re no longer required to make payments on your loans due to your job, this is generally called forgiveness or cancellation. If you’re no longer required to make payments on your loans due to other circumstances, such as a total and permanent disability or the closure of the school where you received your loans, this is generally called discharge.

If you are employed by a government or not-for-profit organization, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) Program.

PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. 

If you teach full-time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency, you may be eligible for forgiveness of up to $17,500 on your Direct Loan or FFEL Program loans. Note: You may not receive a benefit for the same qualifying payments or period of service for Teacher Loan Forgiveness and Public Service Loan Forgiveness. 

If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan. Learn about the eligibility requirements for closed school discharge and how you can apply.

You may be eligible to have all or a portion of your Perkins Loan canceled (based on your employment or volunteer service) or discharged (under certain conditions). This includes Perkins Loan Teacher Cancellation. Learn more about Perkins Loan Cancellation and Discharge and  see whether you are eligible and how to apply.

If you’re totally and permanently disabled, you may qualify for a discharge of your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation.  Learn more about the Total and Permanent Disability Discharge process, eligibility requirements, and how to apply.

Federal student loans will be discharged due to the death of the borrower or of the student on whose behalf a PLUS loan was taken out.  Learn more about discharge due to death and what documentation is needed for discharge.

In some cases, you can have your federal student loan discharged after declaring bankruptcy. However, discharge in bankruptcy is not an automatic process. Learn about the process required to have federal student loans discharged in bankruptcy

You may be eligible for discharge of your federal student loans based on borrower defense to repayment if you took out the loans to attend a school and the school did something or failed to do something related to your loan or to the educational services that the loan was intended to pay for. The specific requirements to qualify for a borrower defense to repayment discharge vary depending on when you received your loan.  Learn about borrower defense to repayment process, eligibility requirements, and how to apply.

You might be eligible for a discharge of your federal student loan if your school falsely certified your eligibility to receive a loan. Learn about false certification discharge to see if you qualify and how to apply.

If you withdrew from school and the school didn’t make a required return of loan funds to the loan servicer, you might be eligible for a discharge of the portion of your federal student loan(s) that the school failed to return. Learn more about the unpaid refund discharge to see if you might qualify.

As with loans made to students, a parent PLUS loan can be discharged if you die, if you (not the student on whose behalf you obtained the loan) become totally and permanently disabled, or if your loan is discharged in bankruptcy. Your parent PLUS loan may also be discharged if the child for whom you borrowed dies.

In addition, all or a portion of a parent PLUS Loan may be discharged in any of these circumstances:

  • The student for whom you borrowed could not complete his or her program because the school closed.

  • Your eligibility to receive the loan was falsely certified by the school.

  • Your eligibility to receive the loan was falsely certified through identity theft.

  • The student withdrew from school, but the school didn’t pay a refund of your loan money that it was required to pay under applicable laws and regulations.

Student Loan Repayment

When it comes to repaying your student loan(s), there’s a lot to consider. Understanding the details of repayment can save you time and money. Ensure you are aware of the following...

Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time—for free. Before you contact your loan servicer to discuss repayment plans, you can use Loan Simulator to get an early look at which plans you may be eligible for and see estimates for how much you would pay monthly and overall. Repayment plans options include:

  • Standard Repayment Plan
  • Graduated Repayment Plan
  • Extended Repayment Plan
  • Revised Pay As You Earn Repayment Plan (REPAYE)
  • Pay As You Earn Repayment Plan (PAYE)
  • Income-Based Repayment Plan (IBR)
  • Income-Contingent Repayment Plan (ICR)
  • Income-Sensitive Repayment Plan

Information on these different repayment plans

Once you graduate, drop below half-time enrollment, or leave school, your federal student loan goes into repayment. However, if you have a Direct Subsidized, Direct Unsubsidized, or Federal Family Education Loan, you have a six-month grace period before you are required to start making regular payments. You’ll have a nine-month grace period if you’ve got a Perkins Loan. (Got a PLUS loan? You’ll go into repayment as soon as the loan is fully disbursed—which means once it’s paid out. But if you’re a graduate and professional student PLUS borrower, you will be placed on an automatic deferment while in school and for six months after graduating, leaving school, or dropping below half-time enrollment.)  More information on when you must begin making payments, the grace period, and circumstances that may affect your grace period.

The U.S. Department of Education (ED) uses several loan servicers to handle the billing and other services on loans for the William D. Ford Federal Direct Loan (Direct Loan) Program and for loans that were made under the Federal Family Education Loan (FFEL) Program and that ED later purchased. Your loan servicer will set you up under the Standard Repayment Plan unless you tell your loan servicer you want a different repayment plan.

You can make payments before they are due or pay more than the amount due each month. Paying a little extra each month can reduce the interest you pay and reduce the total cost of your loan over time. Contact your loan servicer to discuss these options.

Contact your loan servicer as soon as possible. You may be able to change your repayment plan to one that lowers your monthly payment and, in some cases, may be based on your income. You can also ask your loan servicer about your options for a deferment or forbearance or loan consolidation.