I think it could happen, yes.
In that case, you can be eligible for a discharge of your loan, but only the portion that the school fails to return.
And for parents, in the case of a Direct PLUS Loan, can their loan be discharged as well?
The same applies to parents with a Direct PLUS loan. If their child withdraws from school and the school fails to return the parent PLUS loan funds then the portion that it's failed to be returned would be withdrawn from the loan.