How Can I Discharge My Federal Student Loans?

There are ways to discharge your federal student loans. But they are not common.

One common call I get is a closed school discharge. It does exist, but the qualifications are very precise.

Just because your school closed, after you received your degree, does not mean you will get out of your federal student loans. In order to qualify for a closed school discharge, it had to happen while in attendance or within 120 days of leaving the school. Got your degree in 2003, and the school closed in 2016? Not good enough for now.

Even if it closed while in attendance, if your credits will transfer to another school, you might not qualify for a closed school discharge.

Fraud and ID theft can come up. You find out that that there is a loan on your NSLDS report that you never took out, or was not authorized.

Other not so common discharge types are: Disqualifying Status (not able to meet legal requirement for employment at time of loan due to age, physical or mental condition, or criminal record), Ability to Benefit (student did not have a high school diploma or GED at time of loan).

Ability to Benefit is not a discharge just because your degree is “worthless”. Your loans are not going to get discharged because you cannot find a job in your field, or that the line of work only pays say $12/hour. You still got your degree. It is a misperception with many people that Ability to Benefit and Closed School are the same thing. They technically are not the same.

The most common form of discharge would be Total and Permanent Disability.

If you are on permanent disability, you should likely qualify for discharge.

If you are not yet on permanent disability, you would need a doctor to sign off on forms stating you are disabled and cannot work. Then the Department of Education may approve your request for a disability discharge.

We were successful recently in applying for a woman that had advanced Alzheimer’s. Her husband came to us with her social security retirement ready to be garnished. He was persistent with our advice to get his wife’s doctor to sign off on the disability forms. After about 2 months, his wife was approved for a discharge of her loans. Her social security was not garnished. A huge relief for him since they lived on a fixed income.

Lastly, there is always a bankruptcy hardship discharge. Except they are very hard to prove, but not impossible.

I am proud to say that I have done exactly ONE bankruptcy discharge, and won for my client. You might think that isn’t very many. Why haven’t I done more?

Again, it is very hard to prove in bankruptcy court, and very expensive. You have the cost of the bankruptcy (and qualifying for bankruptcy) to start. Then you have the cost of the litigation inside of the bankruptcy… with the risk of losing.

There are payment solutions that are usually safer and more certain that are almost always a better option for almost all clients.

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