Little Known Loan Discharge #3: Unpaid Refund Discharge

Many people know you can get your loans discharged by working for a public service company, being disabled, or death.  But there are other less known loan discharges.  The last one that we are going to highlight is the Unpaid Refund Discharge.

What loans are eligible:

Direct Loans and FFELP Loans

When is my Loan Eligible for Discharge:

You may be eligible for this discharge if you withdrew from school but the school didn’t refund the amount that was owed back to you to the Department of Education or your servicer as appropriate.

You may qualify for this partial discharge whether the school is closed or open.

When is my loan not eligible?

Every school has their own refund policy (such as this percentage after one week, this much after a second week, none after so many weeks, etc.)  So if you are entitled to 80% after one week and withdraw after a week the 20% would not be eligible.

In addition only the unpaid amount will be discharged.

If you believe you may qualify, contact your servicer to get an application for this discharge.  Remember you are still responsible for payments while your case is being researched.

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