Even if you don’t complete college and get your degree, you’ll still need to pay for your student loans in most circumstances. You will be required to proceed to make payments even if you are not financially stable. However, you can have your student loans discharged in some situations. Getting your loan discharged means you are no longer required to repay some or all of your loans.
A loan discharge usually happens if the borrower can’t pay the debt. How do you apply for loan discharge? Contact your student loan provider to find out what type of loan you have, whether you could qualify for a discharge, and what paperwork you need to fill out. Here are some of the types of loan discharges available and how you would qualify for them:
- School Closure
- Bankruptcy
- Total and Permanent Disability
- Death
- False Certification of Ability to Benefit
- False Certification of Disqualifying Status
- Unauthorized Signature/Payment
- Unpaid Refund
- False Certification as a Result of Identity Theft/Forgery
School Closure
If your university closes while you’re enrolled or fewer than 120 days after you withdraw, you could qualify for a discharge for Federal Direct Loans or Perkins Loans. However, you can only qualify if you were unable to get your degree because your school closed. If you were taking an online course, the physical headquarters of the school still must have closed.
You won’t be able to get this type of discharge if you transfer to another college or university and use any credits from the school that closed. If you’re having trouble getting your academic records because your school is closed, try contacting your state’s licensing agency.
Bankruptcy
In cases of ‘undue hardship’, declaring bankruptcy can help you rid of some or all of your student debt. However, there’s no definition of undue hardship. Most judges will require people to try to make payments on their loans. You could get part or all of a loan discharged if you can’t pay it back and need it to pay for basics, such as food and shelter.
You’ll need to show that your financial difficulties will continue for the foreseeable future. This process requires a lawyer and can take years to reach a resolution, which means the lawyer fees will continue to pile up, only adding more stress and hardship. Since discharging student loans through bankruptcy is difficult, many people switch to income-based repayment plans for their federal loans.
Total and Permanent Disability
You can apply for a Total and Permanent Disability Discharge or TPD through the Office of Federal Student Aid or the U.S. Department of Education if you can’t work because of a long-term disability. Your doctor must determine that your disability has lasted at least 60 months and will be present for another 60 months.
If you’re a veteran with a service-related disability, you’ll need documents from the Department of Veterans Affairs. If you get Supplemental Security Income or Social Security Disability Insurance benefits, you must have a disability review scheduled in the next seven years.
You can also get a student loan discharge because of identity theft or death.
Death
If you, the borrower, die, then your federal loans will be discharged. If you took out a Parent PLUS loan borrower, your loan may be discharged if you or the student on whose behalf you obtained the loan dies. Contact the loan servicer for assistance.
False Certification of Ability to Benefit
You may qualify for discharge if your school falsely certified your ability to benefit from the education. A school is required to certify that students who lack a high school diploma or a high school equivalency diploma have the ability to benefit from the education provided by the school. The school may have failed to test or conducted testing in an improper manner.
False Certification of Disqualifying Status
You may qualify for discharge if at the time your school-certified your loan, you had a physical or mental disability, legal status condition or criminal record that would legally prevent employment in your field of study.
Unauthorized Signature/Payment
You may qualify for discharge if you believe that a school representative signed your name without permission on the loan application, promissory note, loan check(s), or authorized your loan to be disbursed by electronic funds transfer or master check without your permission.
Unpaid Refund
You may qualify for a partial unpaid refund loan discharge if you believe your school failed to pay a tuition refund required under federal law if you withdrew during the refund period published by the school, regardless of whether the school is open or closed.
False Certification as a Result of Identity Theft/Forgery
You may qualify if you believe a loan was falsely certified in your name as a result of identity theft or forgery. You will need to complete a notarized Affidavit of Identity Theft/Forgery and submit it to HESC along with a copy of a police report and a copy of the court judgment or verdict stating you were a victim of identity theft.
Do I need to make payments while my loan discharge application is being reviewed?
It depends on the type of discharge you’re applying for, but in most cases, you won’t be required to make loan payments while your application is being reviewed. You should check with your loan servicer to find whether you must continue making payments during the application review period.
What happens if my application for loan discharge is denied?
If your application of loan discharge gets denied you will be responsible for repaying your loan according to the terms of the promissory note that you signed. Contact your loan servicer about repayment options if you have a Direct Loan or FFEL Program loan.
What happens if my application is approved?
If you qualify for discharge of the full amount of your loan, you are no longer required to make loan payments. However, if you qualify for only partial discharge of your loan, you are responsible for repaying the remaining balance.
If you qualify for certain types of loan discharge, you may also receive a refund of some or all payments you have made on the loan, and any adverse information related to your delinquency or default on the loan may be deleted from your credit record. If the loan was in default, the discharge may erase the default status. If you have no other defaulted loans, you regain eligibility for federal student aid.
Finally, you should contact your Loan Servicer if you think you qualify for a Loan Discharge. If you have a Perkins Loan, you should contact the school that made the loan or the Loan servicer the school has designated.
