Administrative Discharge FAQs

  1. What is the difference between a Federal and private student loan? Federal: Federal loan promissory notes and applications will state the name of the Federal loan program (Stafford, PLUS, Perkins, FFEL, William D. Ford Direct Loan Program, etc.) at the top of your monthly bill and loan contract. These loans are backed by the U.S. Department of Education. Private: Private student loans are backed by a bank or private student loan servicer. Most private student loans will have a disclosure statement similar to the information that is included on mortgage loans and car loans. Most private loans are covered by the Truth in Lending Act while federal loans are not.
  2. Are there any tax implications after approval and discharge of my federal student loans? The U.S. Department of Education reports the discharge of any loan debt totaling $600.00 or more to the Internal Revenue Service (IRS) for the year that the loan was discharged. If your loans are discharged, you will receive an IRS Form 1099-C that will identify the total amount of your discharged debt. The amount of the discharged debt will be considered income for federal tax purposes and possibly for state tax purposes. You may want to consult with a tax professional to determine how this may affect your personal taxes.
  3. I have a disability that prevents me from working in the occupation for which I was trained. Can I get a discharge? To be eligible for an administrative discharge, your disability must make you unable to engage in any substantial gainful activity, as defined above. If your disability prevents you from working in the occupation for which you were trained, but you are able to engage in substantial gainful activity involving a different type of work, you would not qualify for an administrative discharge.