Student Loan Discharge

DISCHARGE FOR FEDERAL STUDENT LOANS

There are a few situations that could result in the Discharge of you Federal Student Loans. Death, bankruptcy, and school closing/ loss of accreditation may qualify you for a loan discharge.

Discharge due to Death

If there is a balance on your Federal Student Loans after your death, that loan will then be discharged. For Direct or FFEL loans, a death certificate will need to be submitted to the loan servicer to end any collection attempts. For Federal Perkins Loans, the death certificate must be provided to school for which the loans were taken out.

Parent Plus loans are allowed discharge in this case as well rather it was the parent or the student that has past away. Federal Student Loans are not seen as part of an estate; likewise, estate assets will not be sought by the Department of Education or the servicer to satisfy the balance of a loan.

Closed School Discharge

Federal Student Loan Discharge may be approved if your school closed while you were enrolled, leaving you unable to complete your course work as a result. Being on an approved leave of absence by the school during the time of closing would still allow loan discharge because you are still considered as enrolled. This may also apply if you withdrew from school within 90 days prior to the school closing.

Federal Student Loans will not be approved for a school closing discharge if your withdrawal date is more than 90 days prior to the schools closing.

If you are enrolled in the same degree program at another school, or one that is similar, loan discharge will not apply.

If you compete a program that you already had a loan discharged for, it is likely that you will have to pay that discharged amount back.

If you have completed the course program, but did not receive your diploma or certificate of completion before the closing you loan(s) will not be approved for discharge

Applying for the Closed School Discharge Program

If you have Federal Student Loans and the school you were attending closed while you were still enrolled you may consider submitting an application for the Closed School Discharge Program. This will generally require your submission of academic and financial records showing the school that you were enrolled in and the degree program that you studied under. You will also need you final transcript. If the final transcript was issued before or during the time of school closing be sure to have it ready as evidence to be submitted with your application. If the school did not provide you a final transcript, try contacting the state government licensing department to see what if any arrangements the school made for obtaining records.

Bankruptcy Discharge

Any parent or student applying for Bankruptcy Discharge must have a determination by the judge. The judge will make this decision based on the borrowers ability to prove that the repayment of the loan will cause a grave financial hardship to the borrower and any dependents. Filing either a Chapter 7 or Chapter 13 Bankruptcy will allow a loan discharge if the judge feels you prove to meet three pieces of criteria.

Three-part Criteria for Bankruptcy Discharge

-Your ability to prove to a judge that repayment of your Federal Student Loans will cause you an inability to meet a minimal standard of living for yourself and any dependents in the household.

-You are able to provide evidence that this financial hardship is such that will continue for a large portion of your Federal Loan Repayment Period.

-You must be able to show that effort has been made on your part to repay the Federal Student Loan(s) before you filed for bankruptcy. This generally means at least five years of repayment before a bankruptcy discharge will be approved.

Securing this form of loan discharge is often viewed as the more difficult discharge to be approved. Once you are approved for Federal Student Loan Discharge in a bankruptcy court, you will no longer face any required payments to the loan(s). This will put an immediate end to all collection attempts. Approval for bankruptcy discharge will also allow eligibility for any future Federal Student Aid for yourself or your children if this eligibility was loss in the process of missing payments.

There are a few situations that could result in the Discharge of you Federal Student Loans. Death, bankruptcy, and school closing/ loss of accreditation may qualify you for a loan discharge.

Discharge due to Death

If there is a balance on your Federal Student Loans after your death, that loan will then be discharged. For Direct or FFEL loans, a death certificate will need to be submitted to the loan servicer to end any collection attempts. For Federal Perkins Loans, the death certificate must be provided to school for which the loans were taken out.

Parent Plus loans are allowed discharge in this case as well rather it was the parent or the student that has past away. Federal Student Loans are not seen as part of an estate; likewise, estate assets will not be sought by the Department of Education or the servicer to satisfy the balance of a loan.

Closed School Discharge

Federal Student Loan Discharge may be approved if your school closed while you were enrolled, leaving you unable to complete your course work as a result. Being on an approved leave of absence by the school during the time of closing would still allow loan discharge because you are still considered as enrolled. This may also apply if you withdrew from school within 90 days prior to the school closing.

Federal Student Loans will not be approved for a school closing discharge if your withdrawal date is more than 90 days prior to the schools closing.

If you are enrolled in the same degree program at another school, or one that is similar, loan discharge will not apply.

If you compete a program that you already had a loan discharged for, it is likely that you will have to pay that discharged amount back.

If you have completed the course program, but did not receive your diploma or certificate of completion before the closing you loan(s) will not be approved for discharge

Applying for the Closed School Discharge Program

If you have Federal Student Loans and the school you were attending closed while you were still enrolled you may consider submitting an application for the Closed School Discharge Program. This will generally require your submission of academic and financial records showing the school that you were enrolled in and the degree program that you studied under. You will also need you final transcript. If the final transcript was issued before or during the time of school closing be sure to have it ready as evidence to be submitted with your application. If the school did not provide you a final transcript, try contacting the state government licensing department to see what if any arrangements the school made for obtaining records.

Bankruptcy Discharge

Any parent or student applying for Bankruptcy Discharge must have a determination by the judge. The judge will make this decision based on the borrowers ability to prove that the repayment of the loan will cause a grave financial hardship to the borrower and any dependents. Filing either a Chapter 7 or Chapter 13 Bankruptcy will allow a loan discharge if the judge feels you prove to meet three pieces of criteria.

Three-part Criteria for Bankruptcy Discharge

-Your ability to prove to a judge that repayment of your Federal Student Loans will cause you an inability to meet a minimal standard of living for yourself and any dependents in the household.

-You are able to provide evidence that this financial hardship is such that will continue for a large portion of your Federal Loan Repayment Period.

-You must be able to show that effort has been made on your part to repay the Federal Student Loan(s) before you filed for bankruptcy. This generally means at least five years of repayment before a bankruptcy discharge will be approved.

Securing this form of loan discharge is often viewed as the more difficult discharge to be approved. Once you are approved for Federal Student Loan Discharge in a bankruptcy court, you will no longer face any required payments to the loan(s). This will put an immediate end to all collection attempts. Approval for bankruptcy discharge will also allow eligibility for any future Federal Student Aid for yourself or your children if this eligibility was loss in the process of missing payments.