3 Common Reasons for a Student Loan Discharge

Contrary to what many borrowers may think, a student loan discharge is not common at all. There are very few scenarios in which a lender or court will entirely relieve a student of the obligation to repay a legal debt. This applies to federal debts as well, despite incorrect information that may lead student borrowers to think federal debts can easily be erased. Only if the borrower passes away, becomes disabled or was falsely admitted to a school; if a school closes; or if the borrower declares bankruptcy can the debts be legally discharged without obligation for repayment in the future.

Death of Borrower

The death of the student who borrowed loans from the federal government will lead to a discharge of these loans. The same applies if parents of a student took a PLUS loan for that student and the student passes away. Private debts may not be absolved due to death. The benefactors of a student's estate may have to repay the debts.

Disability of Borrower

A permanent disability preventing a student from earning an income is cause for a discharge. Students who are permanently disabled must receive doctor's authorization and certification on the disablement. They will be subject to a three-year conditional discharge on federal loan. Private loans may be subject to different rules, and a court will typically determine the student's ongoing obligation to pay.

False Admission

It is possible that your college practiced unfair recruitment in order to gain your attendance. This is a very difficult thing to prove, but it can qualify you for a discharge if proven. This typically happens in only four scenarios:

  • You were admitted even though you did not meet admissions standards
  • The school falsely signed your name on loan documents
  • You were not legally eligible to be a student in your field of study
  • You were victim to identity theft

School Closing

If the school you attended closes before you can complete your degree program, you may be eligible for a discharge of loans. If you completed your field of study through another education program by transferring, completing courses at home or other means, you will not be eligible for the discharge of federal loans. Again, private lenders may have their own way of handling school closings. You will have to take the issue before a judge in most cases to argue for a discharge if you feel the school closing took all value away from the loans you originally spent on tuition.


It is rare for debts to be discharged completely in bankruptcy. If you file for Chapter 13 bankruptcy, your debts will be reorganized in a payment schedule you can afford. If you file for Chapter 7, your assets will be liquidated to cover debts. You may be eligible for a discharge only if your assets are insufficient to cover the outstanding debts you face. In this case, the judge will have to determine that continuing to pay your student debts puts you in a significantly compromised financial situation where you could not afford the basic cost of living. This is a very rare scenario for either federal or private student loan discharge.

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