How do I get Student Loan Forgiveness?

Malcolm Tatum

Student loan forgiveness is a process in which a lender chooses to release the debtor from the responsibility of repaying the current outstanding balance due on the student loan. While difficult to obtain, this type of financial forgiveness is sometimes granted under very specific circumstances. Depending on the structure of the loan, it may be possible to obtain forgiveness based on financial hardship, health issues, or the closing of the institution where the student was seeking a degree.

Some voluntary service programs, completed after graduation, allow for student loan forgiveness.
Some voluntary service programs, completed after graduation, allow for student loan forgiveness.

Financial hardship is one of the more common reasons for student loan forgiveness. Typically, the hardship must be extreme, with bankruptcy often involved. It is important to note that depending on the type of bankruptcy protection sought by the debtor, the loan balance may not be completely forgiven. There is the possibility that the court will reduce the amount due, leaving a balance that must be paid. Assuming that the debtor is highly unlikely to be able to repay even a reduced amount, a competent bankruptcy attorney may be able to obtain forgiveness as well as convince the court to dismiss the debt in full.

A student loan application form.
A student loan application form.

Health issues that disable the student may also be grounds for obtaining student loan forgiveness. In this instance, the disability must be so severe that it prevents the individual from earning the money to make payments on the loan balance. Once again, the aid of an attorney to work with the lender is important. There is also the chance that the lender will want to investigate the type and degree of disability in more detail before making a decision about the forgiveness.

Student loan forgiveness may also be granted if the college or university where the student is seeking a degree should permanently close. While this is a rare situation, the effect could be that it is impossible to recover the balance of the loan, since the tuition and fees received up to the time of the closure are not available for reimbursement to students or lenders. When this is the case, the lender may choose to forgive the debt as far as the student is concerned, and focus on recouping the unpaid balance of the loan as the assets of the college are sold to cover outstanding debts. The course of action open to the lender will depend on the laws that apply in the country where the closed institution was located, and any regulations that govern filing claims against the owners of the institution’s assets.

Since student loan forgiveness is somewhat difficult to achieve, many students who are having difficulty retiring college loans may seek other methods of managing the debt. This may include seeking a student loan consolidation that makes it possible to combine the balances of several debts into one relatively easy monthly payment. There is also the possibility of seeking some type of student loan deferment as a means of putting off all or a portion of the payments to a date in the future. Working with legal counsel to determine the best way to manage student debt is essential, especially if there is a chance that student loan forgiveness is an option for a given situation.

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