What to Do if Your Student Loan Cancellation Application Is Denied

This post is the last of a week-long series of articles about how to qualify to get student loans canceled.

By Lynnette Khalfani-Cox, The Money Coach

I’ve already warned you about how difficult it can be to get a student loan discharged. Unfortunately, part of what makes it tough is that for most discharges, the ultimate authority on the matter is the holder of your loan.

The loan holder has the final power to say yes or no to your request for a discharge and you don’t have the right to appeal the decision to the Department of Education, except in two instances: with false certification and forged signature discharges on FFEL and direct student loans.

Ask for a Review
If your claim for a discharge for these types of loans is rejected, you can take your case to the department and ask officials there to review your denial.

Other than that, your best bet in handling a rejected application, if you truly feel you have a valid and worthy claim, is to be persistent in your pursuit of a discharge and to provide as much documentation to your lender as possible in support of your case. This may mean making multiple financial disclosures about your personal situation, explaining your argument time and time again to different people at your lender’s office, or writing letters to supervisors or an ombudsman within a bank or lending institution.

Since the ultimate decision rests with the lender, that’s the place you have to target your efforts.

Get Tips from Loanholders
You should also try to find people who’ve been successful in getting the type of discharge you’re seeking. Ask them for tips and tricks they learned along the way. That firsthand advice from someone who’s been through what you have—and received a hard-fought discharge—could be just the prescription you need to turn a rejection into an approval.

For more information on paying off your student loans, check out my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Student Loan Cancellation and Discharge for Military Service

By Lynnette Khalfani-Cox, The Money Coach

Effective Oct. 7, 1998, all borrowers of Perkins loans are entitled to have those loans discharged if they served in the U.S. armed forces. This cancellation privilege applies to Perkins loan recipients regardless of when the loan was made or what the terms on the original promissory note are. Military personnel qualify for loan cancellations in an amount up to 50 percent of their Perkins loans if they serve in areas of hostility or regions of imminent danger.

For other ways to qualify for a loan cancellation, read:

• Student Loan Cancellations for Teaching and Community Service
• Student Loan Cancellations for School-Related Issues and False Certification
• Student Loan Cancellation Due To Disability
• Student Loan Cancellation Due to Death
• A Student Loan Cancellation Success Story

My book “Zero Debt for College Grads: From Student Loans to Financial Freedom” has even more helpful information. Get the book now at Amazon.com.

Student Loan Cancellations for School-Related Issues and False Certification

In honor of graduation season and those with college student loans, I am posting a series of articles this week about how to qualify to get student loans canceled. These articles are excerpts from my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

By Lynnette Khalfani-Cox, The Money Coach

If the school that you attended closed before you could earn your degree, or if you withdrew from the school or were on an approved leave no more than 90 days before it closed, you can also qualify to get your student loans cancelled. Those of you who completed your studies elsewhere or by transferring academic credits from the closed school to another school are not eligible for this discharge.

You Can Get Money Back
The nice aspect about a closed-school discharge is that when a student loan debt is cancelled for this reason, you get a really sweet deal. For starters, you no longer owe anymore payments. Additionally, the government will actually give you money—by providing you with a refund for any student loan payments you made in the past in connection with a loan obtained at the closed school.

Third, with any student loan that gets discharged, the servicing agency that has been handling your loan will notify all three of the credit bureaus that your loan was discharged. They, in turn, will delete any negative credit history, making you eligible to apply for federal student aid and get all the benefits that would be available to you if you did not have any problems, such as a defaulted student loan.

Check on Closures
If you think your school closed and you need to check the date of the closure to determine your eligibility for a loan discharge, you can search the Closed School Database Web site.

False Certification Discharge
A host of other school-related discharges also exist for student loan borrowers, and they fit under the umbrella of what’s called false certification or improper certification. If you took out a direct loan or a Federal Family Education Loan (FFEL) on or after January 1, 1986, you might qualify for a false certification discharge if you (or your parents) received a loan that was falsely certified by an eligible school.

According to the Department of Education, your eligibility to borrow is considered to have been falsely certified if any of the following conditions were met:

• The school admitted you on the basis of ability to benefit from its training, but you did not meet the applicable requirements for admission on the basis of ability to benefit.
• The school forged loan documents by signing your name without your permission on a loan application or promissory note.
• You had a physical, mental, or legal status or a condition—at the time you enrolled in school—that would’ve legally barred you from getting a job in your field of study. For example, you were imprisoned or had a conviction that prevented you from obtaining employment in your chosen area of study.
• You were the victim of identity theft. This new type of false certification discharge became effective July 1, 2006. As of this writing, discharge guidelines were still being developed. But in the meantime, the Department of Education says that you get forbearance and a halt to any collection activities if you show your lender or guaranty agency reasonably persuasive evidence that your loan may have been falsely certified as a result of a crime of identity theft.