You may apply for a student loan discharge in special circumstances, including if your school closes down, you work in certain fields including the military and teaching, you became disabled, or if your school didn’t pay you a refund owed. Your application is under review until a decision to grant or refuse your student loan discharge occurs. In most cases, you should continue making regular payments on your student loan until you receive a judgment on your discharge application.
Make Regular Payments During The Review Period
In most cases, you will continue paying your federal or private student loan as normal until you hear whether your discharge application was successful.
However, if you have a Federal Perkins Loan and you’re performing in an eligible service role, such as teaching in a low-income school, you may qualify for loan cancellation. Check with your college whether this applies to you. If it does, you may not have to pay anything while your student loan discharge application is under review.
Apply for Forbearance
In some cases, it is difficult to make payments while your student loan discharge application is under review. If you have a Direct Subsidized Loan, a Direct Unsubsidized Loan, a Federal Stafford Loan, or a Federal Unsubsidized Stafford Loan, you may receive forbearance. Forbearance allows you to stop paying your student loans for a short time, such as while your discharge application is under review. In most cases, you’ll still need to pay the interest your student loan accrues while in forbearance.
Speak to your student loan officer to apply for forbearance. It isn’t usually granted automatically, but you’ll normally get a decision before you hear whether your discharge has been approved or denied. You should keep making student loan repayments as normal while waiting on a forbearance decision.
What Happens if I Don’t Keep Making Repayments?
If you stop making student loan payments while your discharge application is under review, the loan could attract more interest. Once your payment is 90 days late, the loan is delinquent. If you don’t make payments for 330 days, your loan will default and the U.S. government will start garnishing your wages. Failing to make payments or making late payments will negatively impact your credit score.
Will I Get Back the Money I Pay While My Discharge Application is Under Review?
Sometimes the U.S. Department of Education will refund some or all the payments you’ve made while your discharge application is under review. Tax isn’t payable on your refund. It’s yours to keep in its entirety. However, not every student who applies for a discharge gets a refund. Speak to your student loan officer to get a better idea of whether you can expect a refund or not.
Making loan repayments while your student loan discharge application is under review is sometimes difficult, but it’s important you make every effort to make payments to avoid further financial penalties. Alternatively, forbearance, which can suspend your payments until a judgment occurs, is sometimes an option.