School-related cancellations offer very broad relief, but are available only in limited circumstances. There is no such thing as a “bad school” cancellation that allows you to cancel your loans because you were dissatisfied with the instruction, degree, job placement services, or other aspects of the school you attended. The school related discharges described in this section are quite narrow. But they are worth reviewing because you can get very broad relief if you qualify for one of these cancellations. All of the school-related cancellations require you to fill out an application form.
The three main categories of school-related cancellations are:
1. Closed School: This cancellation is available if you attended a school that closed while you were a student there or if you withdrew shortly before the school closed.
2. False Certification: There are four categories of false certification cancellations.
3. Unpaid Refund: You do not always have to pay the full amount if you left school early.
Defense to Repayment
If you have a legitimate complaint about your school, but are not eligible for a discharge, you may still be able to raise a school-related claim as a defense to collection. These defenses may be raised even you are current on the loan and there are no collection actions. If you are in default and facing collection, the defenses may be raised in response to all types of collection actions, not just lawsuits. If your school violated state or federal law, you may claim that you are not obligated to pay it back. You may also seek a refund for amounts you already paid.
To submit this type of claim, you should provide information identifying the law that your school violated and evidence showing the violation. Because this can be complicated, you should consider seeking assistance from an attorney.
The Department announced that it is creating a process for Direct Loan borrowers to assert their defense-to-repayment claims. This will include an application process for individual borrowers. It may also include a process for groups of borrowers based on evidence of legal violations from government agencies. The Department has provided some specific information for Corinthian students. The “background” section summarizes options for all students, not just those who attended Corinthian. We will post more information when it becomes available.
Compromise and Settlement
The government has broad discretion to “compromise and settle” student loan debts. This means that if you don’t qualify for a discharge or debt cancellation, you may still ask the Department of Education (often through your servicer) to cancel your debt and/or provide a refund based on your complaint about your school. The Department, however, is not required to approve this request.