Discharging Your Student Loans

Under very special provisions, it is sometimes possible for a student to have his or her loan discharged or canceled. There are strict qualifications and specifics on how a student can receive a student loan discharge, as well as specific steps to follow in order to apply for one.

A student loan can be discharged if the student dies or becomes permanently disabled. With respect to parent loans, it is the student for whom the money was borrowed who most die and not either of the parents. To receive a student loan discharge because of death, then one of two things must happen, depending on the type of loan in question. If the loan is a Perkins Loan, a death certificate for the student must be presented to the university from which he or she graduated. In the case of Stafford Loans, a death certificate must be presented to whoever holds the loan.

As it applies to a student loan discharge, to be completely and permanently disabled is defined as being unable to work and make money due to an injury illness which is expected to last indefinitely or end in death. However, in 2002, this criterion was amended to state that those who qualify for a disability discharge would receive only a conditional cancellation, intended to last for three years from the date a student becomes disabled. If, during that span, the student continues to remain within the qualifications of complete and permanent disability, then the loan will be canceled. If the student fails to continue to meet the conditions, the loan will go back in effect. In order to be approved for a disability discharge, the student must submit a statement from a doctor which states that he or she is completely disabled according to the lender’s definition.

In certain cases, a student can receive a student loan discharge if his or her school closes. If the university closes while a student is enrolled at least part-time, then loans which were received through the Department of Education can be discharged. Anyone on an approved leave of absence is still considered enrolled. Furthermore, if a student has withdrawn and his or her college closes within ninety days after that, he or she may obtain a school loan discharge. However, if a student is pursuing an academic program similar to the one he or she did not get to complete when the other school closed, the student is no longer eligible. Moreover, if he or she receives a discharge and then pursues a comparable program, then he or she could be made to pay back the amount of loans discharged.

Students may also qualify for student loan discharge if his or her loan was approved and allowed even though he or she did to meet the requirements necessary to get into the university or to proceed with the degree for which he or she selected. Provided that the school did not provide the student with the classes necessary to otherwise meet those requirements – not offering remedial course work to a student without a diploma or GED – then the student may qualify for a discharge. As of 2006, students also qualify for a discount if a student’s loan was falsely certified or forged onto a promissory note. Students may also receive a partial discharge, if the lender of their loan owes their school a refund.

There are also discharges for teachers who work in low-income schools, or who otherwise work in designated public school positions. Doctors who practice medicine in rural or low-income areas are another example of this loan discharge.

Finally, in certain cases, if a student files for bankruptcy, he or she may qualify for a student loan discharge. However, this is only if the court decides that paying the student loan payments would create unnecessary hardship.

For more information on student debt after a death, click here.