Student loans affect millions of Americans, many of whom struggle to make their payments every month. Besides income-based repayment options and refinancing, there are few options for those barely squeezing by. However, one that is rarely discussed, but still applies to some borrowers, is student loan discharge.
Discharging student loans is still a fuzzy concept for many. It sounds like it’s too good to be true, but it can be a reality for those who qualify. It’s a complicated process and might require the help of a lawyer or someone with direct experience. In fact, the Department of Education just clarified the rules last month to help borrowers understand how this process works.
It sounds like it could be confusing, but it doesn’t have to be. You can sign up for these programs at StudentLoans.gov. If you want help, we recommend Ameritech Financial, a company I’ve personally vetted. They can help you navigate the student loan terrain and help you systematically apply for the programs offered by the Department of Education. If you’re not sure about doing it yourself, then Ameritech can help you find the repayment solution that’s right for you, and potentially restructure your loans so that you can qualify for programs you may not otherwise have qualified for. You can call them at 1-866-863-3870 or check out their website here.
Read below to see if you qualify and what you need to be able to discharge your loans.
How Borrower Defense To Repayment Works
Borrower defense to repayment involves proving that the university or college deceived the student in some way that involved them taking out student loans. If a university defrauded a student in a manner that led to the student taking out student loans, he or she may be a good candidate to have their loans discharged.
Some examples of fraud include falsifying job placement figures, total school costs, successful credit transfer records and what kinds of degree programs would be offered. That’s part of what happened to students who attended Corinthian Colleges, a network of schools that was found guilty of lying to students. Over 15,000 students have had their federal loans discharged as a result, according to the latest report from the Department of Education.
Only Direct Loans are eligible for discharge for fraud, so graduates with Perkins, unsubsidized Stafford, Parent PLUS, Stafford or Federal Consolidation loans aren’t able to discharge their loans.
Student loan lawyer Jay Fleischman said successful discharge “can lead to not only a forgiveness of the unpaid balance, but also reimbursement for any money you’ve previously paid and removal of any negative information on your credit report related to the loan.”
However, “personal injury or civil rights claims” according to Fleischman, aren’t grounds for having your federal student loans discharged. This is important to note – simply because a lawsuit has been filed against a college or university doesn't mean anything for your student loan debt. You personally need to look at your situation and go through the process if you believe you might be eligible for borrower defense to repayment.
Students who want to discharge their loans must send some required information to the Department of Education, including:
- What laws the school violated
- When you were a student
- What degree program you were enrolled in
- Your contact information
- How the school’s alleged fraud affected your decision to take out student loans
More details on what you need to file a claim can be found here. After the claim has been submitted, the loans will go into deferment for up to 12 months where they will still accrue interest.
The process to discharge your loans is a serious legal matter, and you may need extra help to go through it.
“You’ll need to prove to the government not only that your claim meets the state standard, but also that the statute of limitations for bringing such a claims have not expired,” Fleischman said. “You’ll also want to understand the implications of a discharge of your federal student loans on your taxes, and whether you may be taxed on the forgiven debt.”
Borrower Defense To Repayment And Your Repayment Plan
It's important to note that borrower defense to repayment is an option to get your student loan debt discharged – it's not a student loan repayment plan that offers loan forgiveness. This is important because there are student aid companies and student loan assistance companies that are directly advertising to students who attending Corinthian Colleges and similar with the promise of student loan forgiveness.
If you are looking for help with your student loan debt, make sure you ask specifically what the company is going to do for you. In many instances, these companies are simply signing you up for an income-based repayment plan that includes forgiveness. And while that may work for the short term to help you afford your student loan debt – it's not borrower defense to repayment which may get your total student loan debt discharged.
Whenever you get help for your student loan debt, make sure you fully understand and research the options for yourself. Nobody will care more about your situation and your money than you.
Private Student Loan Debt
Getting private loans discharged is much more difficult. Every loan provider has a different policy, so contact your individual provider to see what theirs is.
Some allow discharge if you’re disabled and cannot work. In that instance, you must be able to prove that you don’t realistically earn enough to pay back your student loans, and there is no hope you ever will.
A few borrowers have successfully discharged their student loans in bankruptcy, but that’s a rare circumstance. A lawyer specializing in private student loan matters might be able to say if your case is sound enough to go to court or not. Make sure to understand their fees before you take on a court case, so you don’t end up worse off financially than you were before.
Final Thoughts
If you think you've been defrauded by your school and are buried in student loan debt as a result, this could be a good option to get help. Furthermore, there are even more protections coming for borrowers starting in 2017 that should provide even more relief.
The tough part is proving you've been defrauded. It's important to keep copies of everything with your school in writing, and save brochures and other documents in a safe place. While many schools are honest and straightforward, a few proactive steps can save a lot of heartbreak later in life.
Have you, or do you know anyone, who's been successful in taking advantage of borrower defense to repayment?
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I recently received a message from slcofa.org, over facebook messenger. It was through an article about ITT Technical Institute closing. I graduated from there back in 2004 and they said my loans could be forgiven if paid over 24 months. My loans are currently through Great Lakes, and these guys sound good, but before i commit to anything, i would just like to know if you guys feel they are legit. Thanks..
Check out this article and look at the red flags: http://thecollegeinvestor.com/16429/is-your-student-loan-repayment-company-a-scam/
With the whole DeVry lawsuit between the FTC, only students who had loans dispersed by DeVry was discharged. Those who had federal loans and other private loans didn’t have their loans forgiven who those who first enrolled in Jan 2008 to Sept 2015. Am I able to use the Borrower Defense to Repayment to get my federal loans discharged due to DeVry’s lawsuit for misleading ads used on perspective students? I was a student that enrolled in 2014.
You can definitely attempt it, especially if you have documentation.
I wanted to know if anyone has ever heard of the Student Doc processing company? I found them while researching The whole Kaplan lawsuit. They said I qualify for the Borrower Defense To Repayment. They stated that it would be up front $499.00 for them to handle the case. In the mean time they will report to the credit bureaus that my loans are being investigated so I will not have to make any further payments and it will not screw up my credit. They also stated that they will filing to get my loans discharged as well as looking for me to get repayment on what I have already paid.
I just was hoping to check and see if this was a scam or not…
Read this article about whether you should pay for help with your student loans and what to look out for when working with companies: http://thecollegeinvestor.com/16429/is-your-student-loan-repayment-company-a-scam/
I was wondering how you are able to check the status of the DTR? I submitted the documentation 6 months ago. Any assistance would be appreciated.
You should be able to contact your loan servicer and ask about the status. They can at least confirm that you are in forbearance as a result of the application.
I went to the University of Phoenix for an MBA. They told me that their program was looked upon as seriously as any other brick and mortar school’s program. Boy, what that a misstatement. I have been getting a lot of emails about a lawsuit against the University of Phoenix for deceptive practices. Especially from “United Legal Aid”.
Has anyone heard of them and is it worth checking out?
I spoke with them today and I think they may be a scam. I attended Ashford University and contacted United Legal Aid, but their website also stated United Legal Discharge. The website seems rather generic and didn’t have the https:, which made me feel uneasy. I’m hoping to find some information or how I can possibly get some of my loans forgiven. Ashford was a horrible decision. The school was expensive and I have not been able to find a job. My degree hasn’t been viewed seriously.
I have been paying on my loans since 2008. In the first few years it was interest only payments and then switched to standard repayment plan. In 2012 I decided to apply for PSLF program since I work in a hospital that is not for profit. I found out I qualified and asked a rep from Navient/Sally Mae not once but twice if my repayment plan qualified for the loan forgiveness to which I was told yes. Now I resubmitted paperwork to keep my employment status up to date, and all of my loans were transferred to myfedloan. Now I am finding out from this company that my previous 5 years of on time payment are not the correct repayment plan for PSLF. To add insult to injury only $5000 of the principle balance has been payed down after all of these years of payments. I am so frustrated and feel like I have been deceived by Navient/Sally Mae. How do I go about getting credit for these last 5 years I was screwed out of?
Sadly, your story is not unheard of. But I have yet to see anyone succeed in getting credit for non-qualifying payments. If you had some type of proof, you might be able to take them to court, but you’d need to speak to a lawyer about that.
Remember, you must meet 3 criteria for PSLF:
– Direct Loans
– Correct Repyament Plan (Standard 10-year, IBR, PAYE, RePAYE, ICR, certain graduated payments)
– Qualifying Employment
Hey All,
I need some guidance here. I received a check from the FYI for my.portion ifnshe settlement. I too have federal loans currently on in school deferment. I enrolled in 2011 and graduated with my AAS in 12/2012. But found no one would hire me, so I returned in 2/15 for my Bachelors, and I am to graduate with my Bachelors at the end of August. Do I need to just apply for the borrowers defense? Will my degree be null as a result? Do I have to “prove” fraud? I’m so confused.
Thanks in advance.
Well, it sounds like your back in school for your bachelors and haven’t graduated yet, so no fraud there.
It was hard to understand, but you received a settlement check from your time getting your AA degree? If that’s the case, I would use that check to pay off a portion of your student loan balance, and then move forward with your bachelors when you’re done next month.
Have you heard of “Elite Borrowers Protection .com”? they are connected to Elite Consulting Services.
Are they legit? I have read that the borrowers defense to repayment can be a hard process and you may need legal help. They ask for $949 upfront for lawyer fees. which is pretty steep considering they haven’t done anything yet. Its a money back guarantee that your accepted into it though.
Then apparently they are going to use my case in a class action lawsuit against the Art Institutes of California along with whoever else buys into this.
Seems too good to be true but not sure. Please advise.
Read the red flags in this article and understand what you’re getting into: How To Find Companies You Can Trust For Your Student Loan Debt.
You might also find this article useful: When Do You Need A Lawyer For Your Student Loan Debt (And How Does It Work)?
Thank you! have you heard of this company before?
I will do some more research cause it sounds more legit than the “pay us, not them” thing considering there is a class action lawsuit involved as well
Hey Ryan,
I just talked to these people today. On the phone he tried to get me to re-set my EDFinancial.com password so they could verify my loans. This seems very fraudulent to me. But there’s literally nothing about them online besides their own site coming up in searches, negative or positive. At first glance their website seems professional enough but I don’t like the look of some of their stock images and their “Cause of Action E Book” that they emailed me seems a little thrown together as well. My instinct is telling me no. Have you contacted them further?
I attended FMU, aka Everest in 2001/2002 acquire 14k in student loans. I withdraw for semester to deal with my son passing. Decided to transfer to St. Petersburg College to finish my AA to fibs or that none credits were any good. I’ve spend 15yrs paying on loans, multiple times wages garnish. I have slowly taking classes and pay outpocket because I don’t qualify for financial aid. It has ruin my credit and it’s being financial for me & my 4 boys. I currently owe $1,100. Is there any way to get help?
You can apply for Borrower Defense to Repayment, and specifically state that none of your credits would transfer. However, that may not work.
You are probably best off looking to earn a little more to pay off the balance of $1,100. If you can focus on earning an extra $100 per month, you’ll have it paid off in less than a year.