If the borrower withdrew from school and the school didn’t make a required return of loan funds to the loan servicer, the borrower might be eligible for a discharge of that federal student loan.
With certain federal student loans, the school may be required under federal regulations to return some or all of the loan money to the loan servicer after the student withdraws from school. If the school didn’t make the required return of the loan funds, the borrower may be eligible for a discharge of the portion of the loan that the school failed to return.
What Loans Qualify?
- William D. Ford Federal Direct Loans;
- Parent PLUS Loans;
- Federal Family Education Loans (FFEL);
How to Apply?
If the school is still open, the borrower should first contact that school to resolve the issue before applying for an unpaid refund discharge. If the school has closed, the borrower should determine if he or she is may be eligible for a closed school discharge instead. Otherwise, the borrower will have to submit the appropriate application to the Department of Education.
How Much will Be Discharged?
Only the portion of the loan that the school should have returned will be discharged.