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The Higher Education Act provides relief for borrowers who are entitled to, but did not receive, refunds from their respective schools. Borrowers who meet the criteria outlined in this subsection may be eligible to have a loan discharged, in full or in part.
The following outlines unpaid refunds; for specific information including claim submission, please refer to the Common Manual.
To qualify for an unpaid refund discharge, a borrower must complete, certify, and submit to his or her lender or guarantor a written request and a sworn statement (notarization is not required), made under penalty of perjury, that declares the following:
- The borrower (or the student for whom a parent obtained a PLUS loan) received any part of the proceeds of the FFELP loan on or after January 1, 1986, to attend school.
- The borrower (or the student), within a time frame that entitled the borrower to a refund, withdrew from, was terminated from, or did not attend the school.
- The borrower (or the student) did not receive the benefit of a refund to which the borrower was entitled either from the school or from a third party, such as a holder of a performance bond or a tuition recovery program.
The borrower’s request must also include the following:
- A statement of whether the borrower has any other request for discharge pending for this loan, in full or in part.
- A statement that the borrower agrees to provide, [upon request by the U.S. Department of Education (ED) or ED’s designee] other documentation reasonably available to the borrower demonstrating that the borrower meets the qualifications for an unpaid refund discharge.
- A statement that the borrower agrees to cooperate with ED (or ED’s designee) in enforcement actions and to transfer to the Department any right to recovery against a third party.
- A statement that the information provided on the request is true and accurate. [§682.402(l)(4)]
The guarantor may, with ED’s consent, grant an unpaid refund discharge without a borrower’s request if the guarantor determines, based on information in the guarantor’s possession, that the borrower qualifies for a discharge.
When a borrower receives a discharge under the unpaid refund provisions, the discharge amount will include other costs associated with the portion of the loan discharged (including accrued interest, late charges, collection costs, origination fees, and guarantee fees). If the total discharge amount exceeds the current outstanding balance of the loan, the lender must refund that excess amount to the borrower.
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