31 Oct Can a Parent Plus loan be forgiven after a college shuts down?

Q. I have a question about student loan forgiveness. I read that if the school has shut down or was fraudulent, there can be grounds to get the loan discharged. The school my daughter attended closed its doors two years ago. Would this qualify the Parent Plus Loan for forgiveness?
— Mom

A. The Biden administration’s student loan forgiveness is on pause as some fight it out in the courts.

Whether or not it’s eventually instituted, there are other circumstances under which loans can be forgiven.

Federal student loans can qualify for discharge, and Parent Plus loans are federal loans, said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton.

A discharge, or forgiveness, is handled differently if a school closed or if you suspect fraud, she said.

“Just because her school closed, it doesn’t mean that your daughter’s loans will be forgiven,” Kane said.

She would likely qualify if she was enrolled or on an approved leave of absence when the school closed, or if she withdrew from school, and it closed within 120 days after she withdrew. This would apply if the loans were disbursed before July 1, 2020 or within 180 days if loans disbursed on or after July 1, 2020, she said.

She could also qualify if she transferred to a similar program at a different school and her credits from school that closed could not transfer, or if she transferred to another school and in a different program, Kane said.

Your daughter probably won’t qualify if she completed the program before the school closed. In that case, the school did its job and she got the credentials , such as a degree or program certificate, she said.

Kane also said she probably won’t qualify if your daughter transferred to a similar program in a new school and it accepted the credits from her closed school or if your daughter wasn’t enrolled in the school at the time it closed. ·

“Your daughter was dealt a raw deal when her school closed,” Kane said. “Make sure that you work directly with her service provider to find out if your Parent

Plus loans qualify for discharge given her specific situation.”

Also, do not stop making payments until you’ve received official notice that the loan has been discharged, she said.

If you think that the school misled your daughter, conducted misconduct or broke the law, then the loans may qualify for discharge under a borrower defense repayment, Kane said.

You will need to explain why you think you’re eligible and provide documentation to support your claim.

“If your daughter doesn’t qualify for the either closed school loan discharge or the borrower defense, your Parent Plus loans may qualify for the Biden student debt relief plan,” Kane said.

You must meet certain criteria to qualify, and you can sign up here.

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This story was originally published on Oct. 31, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.