A few weeks ago, the Student Loan Ranger shared some information about a discharge available to federal loan borrowers whose school closes before the student can complete their credential. While it's nice that the federal student loan programs have a bit of a safety net for those situations, having your school close suddenly is not ideal, to say the least.

This got us thinking about some other safety nets that the federal loan programs offer that are good to know about, but you hope you never have to use. Here are a few to get started.



• Unpaid Refund Discharge: If a student withdraws before completing 60 percent of the academic period for which their federal loan was for, the school is required to return or cancel the appropriate portion of the loan. If they do not, a borrower can apply for what's called an unpaid refund discharge to have that portion of the loan forgiven.

Keep in mind that in most cases, a student must go through the school's posted withdrawal process to be considered officially withdrawn, and therefore eligible for the loan refund. Also, a school's tuition refund policy may not be the same as the federal loan refund policy. So even if the school returns funds to the loan holder, you may still end up owing that money to the school.

• Death Discharge: Unlike some private loans, federal student loans are discharged upon the death of the borrower, or in the case of Parent PLUS loans, the student for whom the loan was taken. To receive this discharge, the family must submit an original or certified copy of the death certificate to all federal loan holders. For Perkins loans, the death certificate must be sent to the school.

Any payments made on the loans since the date of death will be refunded.



Some private lenders also offer discharge upon the death of the borrower, so it's worth asking about. Keep in mind, however, that if a co-signer is involved, the death of the borrower or the co-signer can complicate things.

• Ability to Benefit Discharge: Another discharge the we hope you never need to use – is called the ability to benefit discharge. In this situation, the federal loan borrower states that they have a condition, which could be physical or not, that prevents that student from practicing in the field for which their credential prepared them.

This condition has to have existed when the student borrowed the federal loans, and the school had to have been aware that the condition existed. Examples of this would be a student who was legally blind obtaining loans to attend truck-driving school or someone with a criminal history that would prevent him or her from working with children taking loans to obtain a credential in child care or teaching.



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Less specific degrees and certificates, such as accounting or business, would be difficult to apply this discharge to, as there are multiple career options available to those who pursue them.

If you do need to explore these discharges further, contact your loan holder or check out their website for further instructions and applications. Note that in many cases, you will continue to be due for payment until a completed application is received and you'll need to send an application to every loan holder.