If you withdrew from school, your college or university typically has to refund all or part of the loans it received to pay for your semester to the federal government. If those loans were not refunded, you may be able to get a portion of the loans canceled through an Unpaid Refund discharge. Only Direct and FFEL Loans qualify for Unpaid Refund.
You are not eligible for an Unpaid Refund discharge if you completed 60% or more of the semester.
How Much of My Loans Can I Have Canceled Under Unpaid Refund?
If you completed less than 60% of the semester, and your school failed to return the loans as required, the amount of loans you can have canceled under Unpaid Refund depends on how much of the semester you completed. Only the portion of your loan that your school should have returned will be canceled.
The school is generally supposed to return the funds based on the percentage of the semester you didn’t finish. For example, If you withdrew after completing 40% of a semester, your school should have refunded 60% of the federal loans paid for that semester to the government. If the school did not refund the loans, you may apply for an Unpaid Refund discharge of 60% of the loans. You will, however, still owe 40% of the loan amount paid for that semester, plus any interest or fees accumulated on the 40%.
On the other hand, if you never attended classes or you only attended for a very short time, then you should be able to get a complete cancellation of your eligible loans.
How Do I Apply For an Unpaid Refund Discharge?
Before you apply, you have to try to resolve the issue first by contacting your school. If your school has closed, you may be eligible for a Closed School discharge instead. See more information on our Closed School page. If you cannot resolve the issue with your school, you can apply for an Unpaid Refund discharge by filling out an Unpaid Refund Loan Discharge Application and sending the application to your loan servicer.
Note: If you withdrew from your school after the school’s withdrawal deadline, then the school may ask you to pay back any grants, scholarships, or other financial aid you received for the semester. Some schools will even sue you if these debts are not paid back. Each school has different withdrawal and tuition refund policies. Many schools offer waivers for students who had to withdraw late due to family or medical reasons, but there are often applications you have to fill out in order to get those waivers. Check with your school, review your enrollment agreement, and visit our page on tuition debt for more information.
