Even if you don't complete your education, in most cases you must repay your student loan. In certain circumstances, however, it is possible to get a student loan discharge, which means you no longer have to pay the loan. If you do qualify for a loan discharge, it's worth considering, as it gives you the opportunity for debt reduction.
Valid reasons for a discharge
Simply being in over your head financially regarding your student loan does not qualify you for a discharge. One of the following criteria must be met in order to be considered:
- Bankruptcy. If you file Chapter 7 or Chapter 13 bankruptcy, it is sometimes possible to get your student loan discharged. This can only occur in bankruptcy court in an adversary proceeding, at which time your creditors may come to challenge the request.
(The court will decide in your favor if you've been making an effort to repay the loan for at least five years, and it is proven that making the payments would cause you to be unable to maintain a minimum standard of living during the loan repayment period.)
- Disability. If you become totally and permanently disabled, it is possible to get your loan discharged.
- Employment. Certain occupations entitle you to a discharge of your student loans with some stipulations. Such jobs include teacher, Head Start worker, public service jobs like law enforcement, corrections officer, volunteer in the Peace Corps and a member of the U.S. armed forces serving in hostile areas. Nurses, medical technicians, child or family services workers and professional providers of early intervention services may also qualify.
- School closure. If the school you're attending closes before you complete your degree, you are eligible for a discharge.
How to apply for a discharge
If you think you qualify for a loan discharge, you must contact your loan servicer. For Federal Perkins Loans, call your school's financial aid office or their designated loan service provider. When you're eligible, obtaining a student loan discharge helps you dig out of debt more quickly.
About the Author:
Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies' Home Journal, Parenting, Entrepreneur and The Los Angeles Times.