If a borrower dies, every Federal Student Loan they carry will be discharged. This debt is not considered part of their estate nor will assets from their estate be pursued by either the Department of Education or their loan servicer. If a parent that has taken out a PLUS loan for their child, it will be discharged if either the parent or the student dies. Again, neither the Department of Education nor the loan servicer will pursue the assets of the estate for the parent of the student.
If the student loan was a Federal Perkins Loan, a death certificate must be provided to the school attended by either a family member or a legal representative to begin the discharge process. If it was a Direct Loan or a Federal Family Education Loan, the death certificate must be given to the loan servicer to begin discharge.
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Closed School Discharge
Direct Loans and Family Federal Education Loans can be discharged if your school closes and you meet these criteria:
- The school you are enrolled in closes and you cannot complete your program because of it. This also applies for ANY Federal Student Loan taken out to pay for attending that school. If you were on a leave of absence approved by the school, you are still considered to be enrolled
- If you withdraw from school, you still qualify if the school closes within 90 days after you have left.
Direct Loans or Family Federal Education Loans will not be discharged under these circumstances:
- The school closes MORE than 90 days after you withdraw.
- You are enrolled in a comparable degree program at another school. If you complete this program and have already had your loan discharged, you could be liable to pay back the discharged loan.
- You have completed the course program, but have not received a diploma or certificate of completion from the school before it closed.
If you believe you qualify for a closed school discharge program, contact your loan servicer to ask for a closed school discharge application. In most cases, you will need your academic and financial records to show that you were enrolled in a degree program with that school. If you did not receive a final transcript from the school before it closed, contact the state government licensing department. They will know if the school made arrangements for their records.
If you cannot obtain a final transcript, gather every document you can that shows you were enrolled in the school. Student Debt Relief can help you use those to secure a loan discharge.
This is not a simple process. Any student or parent applying for a bankruptcy discharge must prove to the court that repaying the student loan will cause undue financial hardship on you and your dependents. If you file for bankruptcy discharge under Chapter 7 or Chapter 13, this decision is made in an Adversary Proceeding in bankruptcy court. The judge will use a three-part test to base his determination. Your loan will not be discharged if you cannot meet all three criteria.
- If you have to repay the loan, you will not be able to maintain a minimal standard of living for yourself and your dependents.
- You can show evidence that this financial hardship will continue for an extended period of the lifetime of the loan repayment.
- You have made a good faith effort to repay the student loan before filing for bankruptcy. This is usually a repayment period of no less than five years.
If you do get your Federal Student Loan discharged in bankruptcy court, all collection attempts stop immediately and there will be no further payments required. If you have lost eligibility for further Federal Student Aid in the process, you will now regain it. This is important if you can eventually return to school or want to help your children attend college at some point in the future.
Compare the Best Student Loan Refinance Rates
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.