Let’s discuss an important topic related to student debts – Student Loan Discharge.
Have you suffered any challenging circumstances like an accident leading to a permanent or total disability during your loan repayment period? Student loan discharge comes into play when you face specific situations that make it really tough or even impossible for you to repay your loans. Let’s discuss Student loan discharge in detail in this blog post.
What is student Loan Discharge?
Under certain circumstances, all your federal student loans are canceled or discharged, meaning that you are no longer obligated to pay your debts. There are different situations where the government helps students to ease their burden of debt. Based on those situations there are different types of Student Loan Discharge Loan Programs.
Difference between Student Loan Discharge and Student Loan Forgiveness
In Student Loan Discharge, the whole debt is discharged under certain circumstances, whereas Student Loan Forgiveness involves the partial or complete cancellation of debt after meeting specific eligibility criteria.
Let’s break it down in a simple tabular form.
| Student Loan Discharge | Student Loan Forgiveness | |
| Definition | Cancellation of borrower’s obligation to repay student loans under specific conditions. | Partial or complete forgiveness of loan balance based on meeting certain eligibility criteria. |
| Eligibility | Specific situations like total and permanent disability, school closure, borrower defense, etc. | Based on meeting criteria related to employment, repayment history, or qualifying repayment plans. |
| Type of Debt | Can apply to both federal and private student loans under certain circumstances. | Usually applies to federal student loans, but some programs may also be available for private loans. |
| Outcome | Debt is entirely wiped out; no further payments are required from the borrower. | Part of the loan balance is forgiven, and the borrower may have a reduced remaining balance. |
| Application Process | Specific applications and documentation required to prove eligibility for discharge. | Application through various forgiveness programs offered by the government or loan servicers. |
| Examples | Total and Permanent Disability Discharge, Closed School Discharge, Borrower Defense, etc. | Public Service Loan Forgiveness (PSLF), Income-Driven Repayment (IDR) Forgiveness, etc. |
Student loan Debt is of different types based on different circumstances.
Borrower Defense To Repayment
This is the primary reason for Student Loan Discharge. If a school has committed fraud or violated state laws, you could potentially qualify for a full or partial discharge of certain types of federal student loans as a victim of such misconduct. Examples: The school made false claims or misleading statements on the course’s value, graduates’ placement rate, and loans needed to pay for your educational program.
Eligibility: To be eligible for Borrower Defense to Repayment, you must have taken out federal student loans to attend the school in question. The school must have engaged in actions that violate state laws or made false statements, misrepresentations, or omissions that influenced your decision to attend.
Process: If you are seeking loan discharge under Borrower Defense you must submit a formal application to the U.S. Department of Education. The application should include details of the deceptive practices or misconduct by the school and how it affected you. It may also require providing supporting documentation, evidence, or affidavits. The Department of Education reviews each application on a case-by-case basis. They will assess the evidence presented and investigate the claims made by you. If the Department determines that the school engaged in fraudulent or deceptive practices, your federal student loans may be discharged, meaning you are no longer obligated to repay the debt.
Closed School Discharge
Closed School Loan Discharge offers student loan forgiveness to borrowers who were enrolled in a school that closed while they were attending or shortly after they withdrew. This discharge option aims to protect students who couldn’t finish their education due to the sudden closure of their institution. If you find yourself in such a situation, this option might provide the relief you need.
Eligibility: To be eligible for Closed School Loan Discharge, you must meet certain conditions:
- The school closed while you were still enrolled.
- The school closed when you were on approved leave.
- The school closed within 180 days after you withdrew from the program.
Timeline for Application: You have up to three years from the date of the school’s closure to apply for Closed School Loan Discharge.
Automatic Closed School Discharge: In some cases, if you meet the eligibility criteria for Closed School Discharge, the U.S. Department of Education may initiate the discharge process automatically. This means you don’t need to apply for discharge; it happens automatically.
If your school closes on or after July 1, 2023 and you meet the eligibility criteria for closed school discharge then ED will initiate your discharge. You will be notified by your loan servicer. You can always apply for the closed school discharge early by generally submitting your application form. Talk with your loan servicer regarding this and get your discharge now instead of waiting for one year.
Total and Permanent Disability Discharge (TPD)
Total and Permanent Disability Discharge (TPD) is a program designed to help borrowers who are facing severe and lasting disabilities that prevent them from working and earning a substantial income. The program aims to relieve the financial burden of student loan debt for individuals who are unable to repay due to their disabilities.
Eligibility: To be eligible for TPD discharge, you must provide evidence of your total and permanent disability. This evidence can come from the U.S. Department of Veterans Affairs (VA), the Social Security Administration (SSA), or a physician. You may need to demonstrate that your disability prevents you from engaging in any substantial gainful activity.
Process: After applying for TPD, you will be put under a Conditional Discharge Period of three years. During this period, If your disability status changes and you can work again, you may have to resume loan payments. Following the three-year conditional discharge period, there is a monitoring period of three years to ensure that you continue to meet the eligibility criteria. If disability status remains unchanged, the loans will be fully discharged at the end of the monitoring period.
Discharge due to Death
If the borrower or you (the student on whose behalf the parent has taken the loan) dies then their Federal Student Loan will be discharged. The loan will be discharged after submitting valid proof of death (Death Certificate or any other documentation).
Eligibility: On the submission of valid documents of death by a family member or a representative. With the loan discharge due to death, the borrower’s family or estate is not responsible for repaying the loans. The loans are fully forgiven, and any remaining loan balance is discharged.
How to apply for Student Loan Discharge?
If you’re going through any of these situations then applying for Student Loan Discharge would be a wise option. You can fill out the form online at the official government site, studentaid.gov. Review your documents while submitting the application and talk with your loan servicer if you have doubts.