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 Cancellations In Bankruptcy Are Rare – But Possible

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

By Lynnette Khalfani-Cox, The Money Coach

Under federal law, as of October 8, 1998, you can no longer discharge student loan debt in a bankruptcy proceeding. As with most laws, however, there are loopholes and exceptions to the rule.

In this case, it is technically legally possible to have your student loans discharged when you file for bankruptcy protection, but as a practical matter it is very, very difficult to get a judge to sign off on it.

To have your student loans cancelled via bankruptcy, you have to prove to a judge that repaying your educational debt would cause you a substantial and undue hardship as defined by case law in your jurisdiction.

Historically, most judges have been loathe to allow students to get rid of their student loans in bankruptcy court. Each claim is assessed on a case-by-case basis, and student loan discharges via bankruptcy are highly rare, even among those who’ve tried to demonstrate severe financial hardships.

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.

How to Qualify for a Student Loan Cancellation or a Student Loan Discharge

By Lynnette Khalfani-Cox, The Money Coach

For a college grad with big student loans, it’s probably the closest thing you can imagine to hitting the lottery: getting a discharge or cancellation of all your loans and making those debts instantly vanish. Unlike the lottery, you’re not going to receive a million dollar prize. But if you can get a lender to agree to cancel or forgive $20,000, $50,000, or even $100,000 worth of student loans, wouldn’t that feel like you hit the jackpot?

Loopholes
Well, here’s the good news for anyone struggling with federal student loan debt: you can, in fact, have those enormous student loans completely wiped out—by taking advantage of instances where you’re already eligible for loan cancellation or forgiveness. Let’s call these instances loopholes of the student loan world, because they represent narrow windows of opportunity that you take advantage of by escaping repayment of your student loans altogether.

Check back every weekday this week for a few tips on how to get your student loans canceled.

And here’s even better news: even if you’re not eligible for a student loan cancellation, next week I’ll tell you about programs and initiatives where you get others to pay off your loans on your behalf. Some of them require you to volunteer with non-profit groups or work off your debts by engaging in activities that promote various social or public goals; others are merely yours for the asking.

In the meantime, also read my blog series “Seven Smart Ways to Pay Off Student Loans Fast.”

For even 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.