If you find yourself in a situation where your loan discharge application is under review, it’s important to know what steps you can take to navigate this process effectively.
In this article, we’ll discuss the necessary actions and considerations to ensure a smooth experience. Whether you’re dealing with a federal or private student loan, understanding your options is crucial.
Understanding Loan Discharge Eligibility
Before diving into the specifics, it’s essential to be aware of the circumstances under which you may be eligible for a loan discharge. Some common situations include:
- School Closure: If your school shuts down while you were in attendance or shortly after you withdrew, you may be eligible for loan discharge.
- Qualifying Employment: Certain professions, such as military service or teaching in low-income schools, may make you eligible for loan discharge.
- Disability: If you have become permanently disabled, you may qualify for loan discharge.
- Refund Issues: If your school fails to reimburse you the refund you’re owed, you may be eligible for loan discharge.
Making Regular Payments During the Review Period
While your application is being reviewed, it’s generally advisable to continue making regular payments on your student loan. This ensures that you stay current on your financial obligations and helps maintain your creditworthiness.
However, if you have a Federal Perkins Loan and are engaged in an eligible service role, like teaching in a low-income school, you may be eligible for loan cancellation. Before making any assumptions, it’s best to check with your college to determine if you qualify for this option. If approved, you may be exempt from making payments while your application is under review.
Apply for Forbearance
In some cases, it may be challenging to make loan payments while your discharge application is being reviewed. If you hold a Direct Subsidized Loan, Direct Unsubsidized Loan, Federal Stafford Loan, or Federal Unsubsidized Stafford Loan, you might be eligible for forbearance.
Forbearance allows you to temporarily suspend your loan payments, specifically during the review period. However, keep in mind that interest will continue to accrue, and you’ll be responsible for paying it off.
To apply for forbearance, reach out to your student loan officer. While it’s not typically granted automatically, you’ll usually receive a decision before learning whether your discharge application has been approved or denied. While waiting for the forbearance decision, it’s crucial to continue making student loan repayments as usual.
The Consequences of Not Making Repayments
Choosing not to make loan payments while your discharge application is under review can lead to significant consequences. Not only will your loan accumulate more interest, but it can also become delinquent.
After being 90 days late, your loan will be considered delinquent. Failure to make payments for 330 days will result in loan default, leading the U.S. government to garnish your wages. Additionally, late or non-payments will negatively impact your credit score.
The Possibility of Receiving a Refund
In some cases, the U.S. Department of Education may refund the payments you made while your discharge application was under review. These refunds are generally tax-free and entirely yours to keep.
However, it’s important to note that not all applicants receive refunds. To gain a better understanding of whether you can expect a refund or not, we recommend speaking directly with your student loan officer.
Conclusion
Dealing with a loan discharge application under review can be challenging, but by following the right steps, you can navigate the process successfully. Make every effort to continue making payments unless you qualify for forbearance or loan cancellation.
Remember, maintaining consistent payments is vital to avoid further financial penalties. Stay informed, explore your options, and seek guidance from your student loan officer to ensure the best possible outcome for your situation.
