School Loan Cancellation

A couple of Facebook fans who recently heard me on the Russ Parr Show have asked me to elaborate on the Student Loan Cancellation Program.

Under federal law, you can get your federal student loans canceled or discharged for many different circumstances.

Reasons for loan discharge:

• Death
• Total and permanent disability
• School-related issues or improper certification by your school
• Full-time teaching or public service work
• Military service
• Bankruptcy

Before I explain the nuts and bolts of what’s required for these various loan cancellations, let me first say that there are a multitude of scenarios that won’t get you a loan discharge.

Reasons that won‘t get you a loan discharge:

• If you dropped out of school for any reason
• Experienced personal problems that forced you to abandon your studies
• Didn’t like your instructors
• Couldn’t get a job after graduation
• Were plagued by financial difficulties
• If you thought the quality of the instruction you received was sub-par

None of those reasons will hold weight with the Department of Education.

Perseverance Required

Let me also caution you that getting a student loan canceled or discharged is rare and often requires tremendous perseverance, know-how, and work on your part.

Having said that, even though obtaining a discharge can be a big hassle, it is nevertheless certainly worth the effort and frustration you may experience in the process.

For more details, below are some links to previous articles which I have written regarding this topic:

• How to Qualify for a Student Loan Cancellation or a Student Loan Discharge
• Student Loan Cancellation Due to Death
• Student Loan Cancellation Due To Disability
• Student Loan Cancellations for School-Related Issues and False Certification
• Student Loan Cancellations for Teaching and Community Service
• Student Loan Cancellation and Discharge for Military Service
• Student Loan Cancellations In Bankruptcy Are Rare – But Possible
• Law School Loan Forgiveness
• Health-Care Related Loan Forgiveness

Health-Care Related Loan Forgiveness

By Lynnette Khalfani-Cox, The Money Coach

Did you go to med school or nursing school? If so, you may qualify to have some of your student loans forgiven.

If you have PhD or MD
A little-known loan repayment program at the National Institutes of Health can provide eligible college grads with up to $35,000 a year if you work or do research in the general clinical medicine, pediatrics, fertility or health disparities.

If you have a nursing degree
The Nurses Reinvestment Act is a scholarship/loan repayment program helps those graduates who serve in critical needs areas. The Nursing Education Loan Repayment Program (NELRP) will pay 60 to 85 percent of loans for registered nurses who work in areas where there is a shortage of medical staff.

This post is adapted from my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

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.

Student Loan Cancellation Due to Death

In honor of graduation season and the people who are thinking about how they’re going to start paying off their college student loans, I will post a series of articles this week about how to qualify to get student loans canceled.

By Lynnette Khalfani-Cox, The Money Coach

I can already guess what many of you are thinking about getting a student loan cancellation or discharge for reasons of death. You’re thinking, a) I’m reading this information, Lynnette, so I’m obviously alive and not dead! and b) I don’t have any plans on dying anytime soon, nor do I want to die, so I’m sure a death discharge doesn’t apply to me and can’t benefit me.

Well, I believe you when you say you’re alive—and trust me, I’m glad that you still have a pulse and the wherewithal to read this information and benefit from it! But just because you’re still breathing doesn’t mean you or someone you love can’t benefit from a death-related disability discharge of your student loans.

Here’s how: federal law provides for discharge of student loans in the event of the death of the borrower or the death of the student for whom a parent obtained a PLUS loan [a Parent Loan for Undergraduate Students].

Who’s Eligible?
So let’s say your mom took out a PLUS loan for you and unfortunately she later died. As a PLUS loan recipient, your mom was the borrower, not you. Even if you and she had an agreement by which you would actually pay back the loan, legally she’s the one obligated to do so. Moreover, if your dad co-signed the application, he wouldn’t have to pay the loan back either, as the law says that in the event of the student’s death or the borrower’s death, the obligation of the borrower and any endorser is discharged.

So here’s the bottom line for any of you with parents who took out PLUS loans on your behalf: just know that the death discharge is available not just if you die, but if your parents pass away. By the same token, you should let your parents know that if you die, any PLUS loans they may be repaying can be cancelled.

Lastly, some of you may be married or may have previously consolidated student loans with your spouse when that was possible, under old federal rules. Let your partner know that in the event of your death, he or she doesn’t have to continue paying off those old student loans.

How to Apply
To secure a death discharge, you (or a loved one) have to apply for it. You’ll need to get an original or certified copy of the death certificate and send it to the loan holder for FFEL or direct Stafford loans. For federal Perkins loans, the death certificate must be presented to the school(s) where you obtained your degree.
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This post is an excerpt from my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Tip #4: Seven Smart Ways to Pay Off Student Loans Fast: Get Forbearance Approval

By Lynnette Khalfani-Cox, The Money Coach

Most people think only students who are enrolled in school can get deferments on their student loans. Nothing could be farther from the truth. There are a variety of reasons those with loans can defer or cancel their payments. To learn more, read below for my Tip #4 in a series of “Seven Smart Ways to Pay Off Student Loans Fast.” A new tip is presented each day for seven days. Read also Tip #1, Tip #2 and Tip #3.

Tip #4: Get a deferment, forbearance or loan cancellation during periods of economic hardship.

Practically anyone with an economic hardship can qualify for a loan deferment or forbearance – and some people with severe, chronic financial problems may be eligible to get their loans canceled altogether. Sallie Mae, the nation’s biggest student lender, offers deferments for nearly 20 different scenarios.

Loan payments can be postponed for people who are:

• unemployed
• new mothers re-entering the workforce
• volunteers at non-profit agencies
• military enlistees
• those with excessive credit card debt or unusually high personal expenses

There are many other scenarios under which you may qualify, such as if you’ve had a string of bad luck. Say you went through a divorce, got laid off, then had a car accident — all of which impacted your finances, you can qualify. Also, having a protracted hardship, such as a lengthy medical illness, the department of education may say it’s not worth it to make you pay off your loans — and they can cancel out your loan indebtedness.

Bonus Tip: To claim an economic hardship and ask for greatly reduced student loan repayments, fill out a simple 2-page form called a Statement of Financial Status. Find it online at the Department of Education: http://www.ed.gov/offices/OSFAP/DCS/forms/fs.pic.pdf.