If a borrower was entitled to a refund of a federal student loan because the student did not attend the school, withdrew from the school or was terminated by the school, and the school failed to return the loan funds to the lender, the borrower may be eligible for an unpaid refund discharge. The loan must have been borrowed on or after January 1, 1986.
The amount of the refund to which the borrower was entitled is based on the Return of Title IV (R2T4) calculations:
If the student withdrew before reaching the 60 percent point of the loan period, the borrower was eligible for a proportional refund.
If the student reached the 60 percent point, the borrower was not eligible for a refund.
The discharge will include the amount of the refund that should have been by the school, plus any accrued but unpaid interest and other charges associated with the unpaid refund.
Borrowers who receive an unpaid refund discharge must cooperate with the U.S. Department of Education in enforcement actions brought by the U.S. Department of Education to recover the amounts discharged. Borrowers must also transfer to the U.S. Department of Education the borrower’s right of recovery against third parties.
Borrowers may apply for an unpaid refund discharge by filing a Loan Discharge Application: Unpaid Refund form.