Financial Advice

Could This Loophole Help You Get Rid of Your Student Loan Debt?

Recently I fielded a couple of questions from people who were hoping they could eliminate their student loans on a technicality. There are whispers floating around that taking out student loans without a GED or high school diploma is a free pass to eliminating those loans.

And this misinformation is like the perfect scam, it has a hint of truth to it.

Before I begin, let me share with you the two questions that sparked this article so you can put this situation into context.

“I did not graduate from high school and do not have a GED. I graduated with an AA at a community college, transferred to a 4-year college and graduated. I never stated on any applications or forms that I had a high school diploma. Do you think I may qualify for the ‘failure to thrive (?)’ program that would relieve me of student loan debt?”


“I am trying to have my loan eliminated, if I told them that the [online university] approved everything without proof that I actually graduated from High School with a Diploma, which is actually true would my student loan be eliminated. I am fearful to expose this to the student because I do not want to be held accountable for this. What would you advise?”

How Does the Loophole Work?

The ability to discharge loans for failure to have a GED only applies to federal student loans. And like most federal programs, the devil is in the details.

The Department of Education does allow for a discharge of federal student loans if the applicant can demonstrate a failure to benefit from the education. And here is where the giant loophole to this discharge lives. (More details on this situation can be found here, but here are the highlights.)

First, some schools also admit students without the GED or high school diploma but say things like, “However, in order to receive a degree or certificate…students must have a GED before they graduate.” And oftentimes, a school will administer proficiency testing to determine whether the student can proceed with the program.

So a federal student loan may be discharged if the student did not have a high school diploma or GED if:

  • the program or field of study required a GED or high school diploma, or an equivalent, to benefit from the program and/or;
  • the school did not perform any test, or did not perform the proper test, to determine the student’s ability to benefit from the education.

In other words, if you took entrance tests when you began your higher education, even without a high school diploma or GED, the chances are you are out of luck for the discharge. However, if the school didn’t verify your degree or certificate — and you didn’t have one — or give you the proper testing, you might be eligible.

Either way, if you want to give it a shot, here is the form to apply for a false certification of ability to benefit discharge.

If you apply for a discharge, you should still continue to make payments on your student loans. However, you may be able to obtain a forbearance in the meantime — but the key is to make sure it’s in place if you do stop paying. If your application for the loan discharge is denied, then you may still be on the hook for those loans. So if you’re having trouble making payments, work with the loan servicer to find a payment plan for which you can qualify.

Falling behind on your student loans can hurt your credit — you can see the impact your student loan debt is having on your credit by getting your free annual credit reports from, and you can check your free credit report summary on every 30 days to watch for important changes.

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This article originally appeared on

This article by Steve Rhode was distributed by the Personal Finance Syndication Network.