Student loans are an eminent feature of the US society with an average debt of about $23,000 per student. Student debt are liabilities to be repaid and different types of borrowers adopt different forms of repayment plans that suit their needs best. A student loan is specifically designed for students to pay for their education expenses and carry substantially lower interest rates and suitable repayment schedules to help students pay them back when they are capable of. In the United States of America, there are mainly two types of student loans, namely, Federal student Loans and private student loans.
Student loans are different from scholarships and grants and are supposed to be paid off. But it isn’t always that easy to pay off those student loans accumulated over years. The student loan repayment becomes even more painful when the borrower is hit by an unforeseen complication such as a prolonged illness, disability or heavy expenditure et cetera. An individual’s financial situation might become difficult when he is not able to find a job that can support loan repayment or things do not turn out to be as expected.
Discharge of a student loan
Discharge of a loan means when the borrower is no longer liable to repay one’s loan. In other words, the loan is cancelled and the debt burden is removed. In the US economy, discharge of loan is generally associated with student loan, home loans and mortgages. However, discharge of a loan does not necessarily imply bankruptcy. There can be some other reasons as well for discharge of loan. The Federal Student Aide, an office of the US Department of Education offers for forgiveness, cancellation and discharge of student loans under different circumstances to help student borrowers in genuine need.
Other than discharge for bankruptcy, an individual might be eligible for a discharge if he/she withdrew from school but the school did not pay a refund that it owed to the U.S. Department of Education or in some cases, to the lender. There is another plan called The Federal Perkins Loan Cancellation that applies to individuals who perform certain types of public services or certain types of occupations such as Teacher, Member of the U.S. armed forces, Nurse or medical technician et cetera. Also, an individual with Federal Student Loan might qualify for Total and permanent disability discharge programme if they are incapable of arranging in any gainful activity because of physical or mental impairment.
Unpaid refund discharge
An individual might be eligible for a discharge of Direct Loan or Federal Family Education Loan programme loan if he/she withdrew from school but the school did not pay a refund that it owed to the U.S. Department of Education or to the lender. The amount of loan that can be discharged, however, is equal to the amount of refund not paid. For example, if a borrower withdrew from school before the beginning of the semester and the school did not return the amount of tuition fee, the student is eligible for discharge of student loan that he/ she took to pay for the school fee.
On grant of discharge of student loan, the borrower will be discharged of the unpaid refund along with any additional charges, if accruing. The borrower is required to fill the Unpaid Refund cancellation form in order to apply for unpaid refund discharge. The application need to be sent to the lender. If a borrower is unsure of his/ her lender, one can refer to the National Student Loan Data System (NSLDS) to gain more information about the same.
Generally, the final decision of whether the loan will be discharged or cannot be appealed and is not reviewed or reconsidered by the US Department of Education. On rejection of the discharge application, the borrower is required to make the remaining payment towards his/ her student debt. The borrower might ask the US Department of Education to review the application, and if not satisfied, can appeal in the federal court. The borrower is required to fill the Unpaid Refund cancellation form in order to apply for unpaid refund discharge. The application need to be sent to the lender. If a borrower is unsure of his/ her lender, one can refer to the National Student Loan Data System (NSLDS) to gain more information about the same.
We all wish for a good career by studying in a top notch institute, even by the use of student loans. However, there can be various reasons for a student to withdraw from a school. As mentioned above, while federal student aide provides an effective solution to overcome debt in such a case. With such possibilities existent, discharge of student loans due to unpaid surely benefits many, if not all. In the mid of criticism by some economist for high cost of subsidies, such discharge programs have succeeded in benefiting more people with each amendment and hopefully, would continue the legacy with coming years.