How long does a loan discharge take? (2024)

How long does a loan discharge take?

Once the processing is complete, it will take additional time for the servicer to make adjustments to your payment counts and apply discharges.” Borrowers should expect that the process may take up to six months, and in some cases, longer.

Once the processing is complete, it will take additional time for the servicer to make adjustments to your payment counts and apply discharges.” Borrowers should expect that the process may take up to six months, and in some cases, longer.

How Long Does a Borrower Defense Case Take? The timeline to hear back from the Department of Education may vary depending on the case. The department has three years to make a decision after determining whether it is materially complete.

A debt discharge occurs when a debtor qualifies through bankruptcy court. When debt is discharged, a lender can no longer make attempts to collect the debt and the debtor is no longer responsible for paying it back. Debt discharge often results in taxable income to the debtor unless certain IRS conditions are met.

Your loans should automatically qualify for forgiveness after you've spent 20 or 25 years in repayment. Reach out to your loan servicer about any steps you may need to take.

As long as your loans were in good standing at the time they were discharged and your accounts are being reported properly to the credit reporting bureaus, you won't see a huge difference in your score. On the other hand, you could see your score drop if your account wasn't in good standing prior to the discharge.

Student loan debt has been more difficult to discharge through bankruptcy than other kinds of debt and borrowers seeking discharge faced high costs and low odds of success in the past.

You can check the status of your borrower defense case by logging in to your StudentAid.gov account. Or you can contact Borrower Defense Customer Support at 1-855-279-6207.

The Sweet settlement only impacts individuals who applied for borrower defense discharge on or before Nov. 15, 2022. If you didn't apply on or before Nov. 15, 2022, learn more about borrower defense and whether to apply.

Specifically, you may assert borrower defense by demonstrating that the school, through an act or omission, violated state law directly related to your federal student loan or to the educational services for which the loan was provided.

Is loan discharge the same as forgiveness?

Put simply, Student loan forgiveness, cancellation, or discharge all mean that you are no longer required to repay some or all of your loan balance. While often used interchangeably, there are important distinctions between the terms and when they are applicable.

Student loan forgiveness is usually based on the borrower working in a particular occupation for a period of time. Student loan discharge is usually based on the borrower's inability to repay the debt or the borrower not being responsible for the debt because of fraud.

Once we have made a decision in your case, you will be notified by email. If your claim is approved, you will receive a discharge related to your claim and/or a refund of payments made to ED on those loans.

The Federal Student Aid website says, however, that relief can be expected within four to six weeks of completing the application; the website also advises to apply before Nov. 15, 2022, in order to see your loans forgiven by the end of this year. Some qualified borrowers, however, may see their forgiveness sooner.

If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt relief. If you did not receive a Pell Grant in college and meet the income threshold, you will be eligible for up to $10,000 in debt relief.

Your loan can be discharged only under specific circ*mstances, such as school closure, a school's false certification of your eligibility to receive a loan, a school's failure to pay a required loan refund, or because of total and permanent disability, bankruptcy, identity theft, or death.

If you qualify for discharge of the full amount of your loan(s), you're no longer obligated to make loan payments. If you qualify for discharge of only a portion of your loan(s), you're still responsible for repaying the remaining balance.

You can go back to school and get a new Direct Loan or TEACH Grant after getting a TPD discharge. But to do so, you must do the following: Give your school a letter from a doctor of medicine or doctor of osteopathy/osteopathic medicine stating that you are once again able to engage in substantial gainful activity.

Although loan forgiveness can impact a credit score, the effect is often temporary. And for borrowers with federal student loans in default, the Fresh Start program could give them a clean slate, removing the default from their credit reports.

Are discharged student loans taxable?

How taxes are handled depends on when you qualify for discharge. If you received discharge before January 1, 2018, the discharged loan amount is subject to federal income taxes. Loans discharged between January 1, 2028, and December 31, 2025, are exempt from federal income taxes.

If your loan(s) is discharged due to Social Security Administration (SSA) documentation or a physician's certification, you are subject to the three-year post-discharge monitoring period beginning on the date your TPD discharge is approved.

Today, the U.S. Department of Education's (ED) new borrower defense regulation (2023 Regulation) has taken effect. The 2023 Regulation establishes a strong framework for borrowers to raise a defense to repayment if their institution misleads or manipulates them.

If your borrower defense claim is approved, you may receive a refund of payments you previously made on the Direct Loan or on a loan repaid by the Direct Consolidation Loan. Your loan servicer will let you know whether or not you're eligible for a refund.

If you end up receiving Sweet relief before your PSLF is granted, you should receive a refund of any amounts paid to the Department of Education toward Direct or Direct Consolidation loans, including a refund of prior qualifying PSLF payments. (This does not include refunds of payments on commercially held FFEL loans.)