If you’re faced with the consequences of a defaulted student loan, you may be able to dispute it. Essentially, there are three legitimate reasons to dispute a student loan: you don’t have an obligation to pay the loan; the loan amount is incorrect; or you’re experiencing financial hardship.
You may not be liable for paying the default student loan if you were the victim of identity theft, if you didn’t sign the promissory note, or if you’re the victim of mistaken identity (the name or Social Security number on the loan isn’t yours). Similarly, there may be a records mix-up, and you may have paid the loan or the loan may have been discharged.
There are other circumstances where the loan amount may be forgiven. For example, if you are totally and permanently disabled, you may be eligible to have the loan discharged. Similarly, if you are a veteran who is unemployable because of a service-related condition, you may have the loan forgiven.
If you didn’t graduate or complete your education because the school you were attending closed while you were enrolled, or closed within 90 days after you left the school, your loan may be eligible for dismissal. On a related note, if you received a loan and did not end up attending the school, withdrew, or were forced to withdraw, the school may have been required to refund the loan amount to the Department of Education. If the school didn’t refund the money, you may be eligible to have the loan terminated.
Other rare circumstances can result in a student loan being discharged. If, for example, you enrolled in a course of study for which you were not qualified (by not having a high school diploma or GED) or from which you could not benefit, you may be able to have the slate wiped clean.
When it comes to disputing the loan amount, your records must be pristine. The loan not only accrues interest, but you are liable for paying any costs associated with collecting the student loan debt. The Department of Education has a specific process for disputing the amount of a student loan debt that involves sending copies of cancelled checks, money orders, garnishment notices, credit card billing statements, and so forth.
If your income tax refunds or Social Security benefits have been “offset,” or taken for repayment of your student loan, it’s possible to file a dispute on the basis of financial hardship. To do so, you may be required to complete a financial status statement, and provide documentation for your claim. If you and your spouse file a joint income tax return, the government can clawback the entire tax refund – even if it’s based partly on your spouse’s income. Your spouse may be able to get back his or her part of it by completing IRS Form 8379. Some states may have similar provisions for state income tax refunds.
Financial hardship can also be claimed if your wages have been garnished or when your student loan goes into default and the entire amount is payable immediately. Typically, you need to complete a financial disclosure statement for your entire household in order to establish that a hardship exists. In cases of wage garnishment, you must request a hearing.
