Student Loan Discharge: What You Need to Know
Student loans are a reality for many students who want to pursue higher education, but sometimes life circumstances can make it difficult to pay them back. If this is the case for you, it's important to know that there are options for student loan discharge.
What is Student Loan Discharge?
Student loan discharge is the cancellation of all or part of your student loan debt due to certain circumstances, such as permanent disability or the closure of your school. Not everyone is eligible for student loan discharge, but it's worth exploring if you find yourself struggling to make payments.
Types of Student Loan Discharge
There are several types of student loan discharge, each with its own eligibility requirements and qualifications. Let's take a closer look at some of the most common types of student loan discharge.
1. Total and Permanent Disability Discharge (TPD)
If you become totally and permanently disabled, you may be able to get your federal student loans discharged. To qualify for TPD discharge, you must provide documentation from a physician certifying that you're unable to work due to a physical or mental impairment.
2. Closed School Discharge
If your school closes while you're enrolled or within 120 days of your withdrawal, you may be eligible for a closed school discharge. This discharge will cancel all of your federal student loans taken out for attendance at that school.
3. Death Discharge
If the borrower passes away, the federal student loan debt is discharged. In addition, some private student loans may offer a death discharge, but it's not a guarantee.
4. Bankruptcy Discharge
Bankruptcy discharge is a very rare way to discharge student loans. Usually, student loan debt cannot be discharged in bankruptcy, but there are some cases where it could be possible.
Requirements for Student Loan Discharge
To qualify for a student loan discharge, there are some requirements that you have to meet depending on the type of discharge you're applying for. During the application process, you'll be required to provide supporting documentation. The types of documents that may be required include:
- A written application
- Supporting documentation
- Medical records in the case of disability discharge
- School closure letter in case of Closed School Discharge
How to Apply for Student Loan Discharge?
Applying for student loan discharge can be a complicated and time-consuming process, but it's important to take the necessary steps to ensure that you receive the benefits you're entitled to. The best way to start is to review the Department of Education’s website where you can find the necessary information, forms and application details for each type of discharge.
In addition, you can call your servicer or the Student Loan Ombudsman Group if you have any specific questions or concerns about the process. Make sure to keep records of all correspondence and documentation related to your application, and follow up with your servicer if you encounter any issues.
Loan Forgiveness vs. Loan Discharge
It's important to note that student loan discharge is different from loan forgiveness. Loan forgiveness is a way to reduce or eliminate the amount of money you owe, but you're still required to pay back some portion of the debt. Student loan discharge is a complete cancellation of the debt, and you're no longer responsible for making payments.
However, both loan forgiveness and loan discharge can have tax implications. In some cases, the cancelled debt may be considered taxable income by the IRS.
Conclusion
Student loan debt can be overwhelming, but there are options available to help you manage or even discharge your debt in certain circumstances. If you're struggling with student loan payments, it’s important to find out which options you're eligible for and start taking steps to apply for discharge or forgiveness. Remember, taking early action could save you money and alleviate financial stress in the long run.