How to apply for a student loan discharge


Applying For a Discharge

If you qualify for a loan discharge, you must apply for one:

  • Federal Perkins Loan borrowers must apply to the school that made the loan or to the loan servicer the school has designated.
  • Direct Stafford and PLUS Loan borrowers must contact the Direct Loan Servicing Center. You can also call the Servicing Center at 1-800-848-0979.
  • FFEL Stafford and PLUS Loan borrowers should contact the lender or agency holding the loan. You can also find a number of discharge forms online.

If you're not sure what type of loan you have or who holds it, go to www.nslds.ed.gov.

The holder of your loan can answer any questions you have about loan discharge.


Making Payments On Your Loan While Your Discharge Application is Reviewed

Until you hear whether your discharge has been approved, you should continue making payments on your loan to prevent it from going into default or accruing (accumulating) additional interest. However,

  • if you have a FFEL or Direct Stafford Loan, you can be granted forbearance. The holder of your Stafford Loan should grant forbearance until a decision is made on your application. If a forbearance is granted, no one is permitted to collect on your loan until the holder of your promissory note determines whether you are eligible for a loan discharge.
  • if you have a Federal Perkins Loan, schools must automatically defer your loans if you are performing service that will qualify you for loan cancellation (such as teaching in a low-income school). You don't need to apply for this deferment. Schools may grant such a deferment for up to 12 months at a time.

Approval of a Loan Discharge

If you qualify for a complete discharge of your loan, you are no longer obligated to make loan payments. Depending on the type of loan discharge program you may be eligible for, the holder of the loan may be required to refund to you some or all of the monies you paid on the loan. In addition, the loan holder may be required to delete any adverse credit record related to a default, and no tax refund offset or wage garnishment will take place to collect on the discharged loan. 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 financial assistance. Your loan holder can answer any questions you may have regarding your eligibility for a refund.

Note: In some cases, your school might be required to refund a portion of a FFEL or Direct Loan to your lender (for example, you withdrew from school within a timeframe that required a refund of loan monies). If your school fails to make that refund, that portion of your loan will be canceled, but you will be responsible for paying any remaining amount. (See "School-Related Discharges" below.)


Denial of Loan Discharge

For most all discharges, the holder of your loan makes the final decision on whether to discharge the loan—you cannot appeal the decision to the U.S. Department of Education. The two exceptions are false certification and forged signature discharges for a FFEL or Direct Stafford Loan (see "School-Related Discharges" below). If you receive these types of discharges, you may ask the Department to review the denial.

If your loan discharge is denied, you remain responsible for repaying the loan. Talk to your loan holder about repayment options if you have a FFEL or Direct Stafford Loan. Check out repayment options by reading the Loan Repayment section of Funding Education Beyond High School: The Guide to Federal Student Aid.

If your loan is in default, ask about loan rehabilitation and loan consolidation. Also, see our Guide to Defaulted Student Loans for more information.

If your school has closed, you should also explore the following options if your discharge application is denied:

  • Contact the state licensing agency and ask if there is a tuition recovery fund or performance bond that will cover your damages based on the school closure.
  • If the school filed bankruptcy, you should file a claim for your loss in the bankruptcy proceeding. You also might want to consult an attorney about any options you may have through the court system.

Death Discharge

Cancellation because of the borrower's death (or, in the case of PLUS Loans, the death of the student for whom the parent borrowed) is based on an original or certified copy of the death certificate submitted to the school (for a Federal Perkins Loan) or to the holder of the loan (for a FFEL or Direct Stafford Loan).


Total and Permanent Disability Discharge

Total and permanent disability is the inability to work and earn money because of an injury or illness that is expected to continue indefinitely or to result in death.

You must submit a physician’s certification of total and permanent disability. The physician must certify that you are 100 percent disabled according to the definition of disability above.

As of July 1, 2002, if you are determined to be totally and permanently disabled, you will have your loan placed in a conditional discharge period for three years from the date you became totally and permanently disabled. During this period, you don't have to pay principal or interest. If you continue to meet the total-and-permanent disability requirements during, and at the end of, the three-year conditional period, your loan will be canceled. If you don't continue to meet the cancellation requirements, you must resume payment. For more information on qualifying for this discharge, contact your loan holder.


School-Related Discharges

  • Your school closed . . .
    If your school closes while you're enrolled, and you can't complete your program because of the closure, any U.S. Department of Education loan obtained to pay your cost of attendance at that school can be discharged. If you were on an approved leave of absence, you are considered to have been enrolled at the school. If your school closed within 90 days after you withdrew, you are also considered eligible for the discharge. However, your loan cannot be cancelled because of personal circumstances that caused you to withdraw more than 90 days before the school closed.

    Please bear in mind that you are not eligible for the discharge if you are completing a comparable educational program at another school. If you complete such a program at another school after your loan is discharged, you might have to pay back the amount of the discharge. If you haven't received a diploma or certificate but have completed all the coursework for the program, you're not eligible for the discharge.

    If you need to find out the day your school officially closed, you can visit our Closed School Search Page. For answers to questions about your closed school, call the appropriate person on our list of Closed School Unit Contacts.

    If the holder of your loan learns your school closed, your loan holder will send you a loan discharge application. If you don't receive an application, contact the loan holder (see contact information above).

    Getting your financial aid and academic records if your school closes.
    Contact the state licensing agency in the state in which the school was located to ask whether the state made arrangements to store the records. The records might be useful in substantiating your claim for a loan discharge. For more information, please visit www.nasasps.com/contacts.html.

    You might need your academic records if you plan to attend another school and want to have your coursework at the closed school taken into consideration. If you’re applying for aid at the new school, it can check the Financial Aid History information included either on the Student Aid Report you received or in the electronic record the school receives. If you're transferring in the middle of the year, your new school must check your information in the National Student Loan Data System (NSLDS).

The following three school-related discharges apply to FFEL and Direct Stafford Loans only.

  • You didn't have the "ability to benefit" from the coursework (false certification) ...
    A Stafford Loan can be discharged if the school admitted you based on your ability to benefit from the training, but you weren't properly tested to measure that ability, or you failed the test. You might also be eligible for this type of discharge if you did not meet the physical or legal requirements of your state to enroll in the program or to work in the career for which you were training, regardless of whether you had a high school diploma or General Education Development (GED) certificate.If you had a high school diploma or GED when you enrolled in the program, you're ineligible for this discharge because those documents are sufficient to establish your ability to benefit from further training after high school. You may not be eligible for a discharge if you received a GED before you completed your program of study at the college or career school, or you completed a developmental or remedial program at the school.
  • Your signature was forged on the loan documents ...
    If you believe someone forged your signature on your FFEL or Direct Loan promissory note or authorization for electronic fund transfer, you must attach five different samples of your signature to your application for the loan discharge. At least two of the samples must be on documents that are clearly dated within a year before or after the date of the contested signature. You may not be eligible if the loan was used to pay your school charges for the portion of the program of study you completed (whether the payment was by a credit to your account or by cash or check).
  • The school owes your lender a refund ...
    You might qualify for partial discharge of a FFEL or Direct Loan if your school failed to pay your lender a refund required under federal law. Only the amount of the unpaid refund will be discharged. You may qualify for this partial discharge whether the school is closed or opened. Contact your loan holder for more information.

Note that your loan cannot be discharged because you weren't satisfied with the school's services. Your loan can't be discharged solely because you believe the school

  • provided poor training or had unqualified instructors or inadequate equipment,
  • did not provide job placement or other services that it promised, or
  • engaged in fraudulent activities (other than falsely certifying the loan).

Also, a loan discharge can’t be granted because you attended an ineligible program of study offered by the school. The state licensing and accrediting agencies for the school are responsible for the quality of educational services the school provides. The U.S. Department of Education does not endorse the school's educational programs or guarantee the school will deliver the services for which a student contracted.


Child Care Provider Loan Forgiveness Program

The Child Care Provider Loan Forgiveness Program is a demonstration program that is intended to bring more highly trained individuals into the early child care profession and to retain them in the profession. Under this program, individuals who work full-time in certain child care facilities that serve low-income families and who meet other qualifications may be eligible to have up to 100 percent of their FFEL and/ or Direct Loan program loans forgiven. While, we are not accepting new applicants into the program because no additional funding has been provided, applications for renewal benefits are available for those borrowers who have previously been granted forgiveness under the Child Care Provider Loan Forgiveness Program. Our Child Care Provider Loan Forgiveness Processing Unit handles the distribution and processing of these applications for the Child Care Provider Loan Forgiveness Program.

If you have any questions with regard to the Child Care Provider Loan Forgiveness Program or the Child Care Provider Loan Forgiveness Application, you can contact the Child Care Provider Loan Forgiveness Unit at 1-888-562-7002 (TDD: 1-800-877-8339) You can direct any correspondence to Child Care Provider Loan Forgiveness Program applications to the following address:

    Child Care Provider Loan Forgiveness Program
    P.O. Box 4639
    Utica, NY 13504-4639

If you think you qualify, you can apply for forgiveness here. You can also obtain a forbearance on your loan(s) while you are providing full-time child care services for the next year. If you have a Direct Loan, click here to complete a Direct Loan forbearance form. If you have a FFEL, click here, or contact your loan holder, who can provide the forbearance form and determine your eligibility. You must return your completed forbearance form to your FFEL lender. If you need help obtaining a forbearance form from your lender, call 1-888-562-7002.


 



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