Written By Melanie Lockert
Has your school shut its doors? Or have you received the dreaded news that your for-profit college is shutting down? If you took out student loans to attend a school that’s now closed or in the process of being closed, you may have a lot of questions about closed school discharge.
There are colleges out there that have closed their doors for good. It can be a jarring experience to have your school close and you’re left wondering what will happen. One big question you may have is: “Do I have to pay my student loans if my school closed?”
I know this answer is frustrating, but it depends.
Read on to learn more about what to do with your student loans after your school's closure.
Who is eligible for Closed School Loan Discharge?
Let’s start with some good news. It is possible to get your federal student loans 100% discharged, under certain circumstances. So if you’re wondering if you have to pay your student loans if your school closed, the answer is (hopefully) no. But you'll need to make sure that you meet the eligibility requirements.
If you have a Direct Loan, Federal Family Education Loan (FFEL) or Federal Perkins Loans, you may be eligible for closed school loan discharge if you:
- Were a student and enrolled in college at the time the school closed
- Were on a leave of absence that was approved by your school at the time the school closed
- Withdrew from school and your school closed within 120 days if your loans were first disbursed before July 1, 2020.
- Withdrew from school and your school closed within 180 days of that period if your loans were first disbursed on or after July 1, 2020.
If you meet one of these criteria, you may be eligible for 100% student loan discharge.
Who is not eligible for Closed School Loan Discharge?
On the other hand, you are disqualified from getting your student loans discharged if the school you attended closed and:
- You withdrew from school within a period that exceeds 120 days, except in rare cases
- You are enrolled and part of another educational program
- All of your coursework for your program is done — this is still true even if you have not yet obtained your diploma or certificate
- You completed a comparable program through a teach-out, by transferring academic credits to a new school or other other comparable means.
“Teach-outs” allow you to complete remaining coursework toward your original program and earn your diploma through another school. In this case, you’d still be on the hook for student loans as you’re still able to complete your education and obtain a degree. On the other hand, if you say no to a “teach-out” offer, it’s likely you'll not have to pay back your federal student loans.
Note that you'll only be able to receive loan discharge for programs that you weren't able to complete because of your school shutting down. If you were enrolled in a different program that you could have completed, you will qualify for a loan discharge for the funds you took out for that program.
It’s important to note that this information is regarding federal student loans only. If you have private student loans, you'll need to contact the lender to see about their policy and procedures.
Applying for student loan discharge
If your school closed and you have federal student loans, they will not be automatically dismissed. You must apply to get your loans discharged.
First, fill out the Closed School Loan Discharge Application and send it to your student loan servicer. Secondly, ask your loan servicer about the application process for getting your student loans discharged. There is not a set deadline for the application. But you’d want to submit it as soon as you can.
If you are currently making payments, be sure to continue doing so until you are approved or denied for the discharge. Once approved for student loan discharge, you’ll be off the hook for any repayment going forward.
If your application for student loan discharge is denied, you legally still have to make payments per your promissory note. If you are denied and think there has been a mistake, get in touch with your loan servicer and explain your reasoning.
Regarding what to do next with your schooling, you can take a look at the Department of Education's Closed Schools list to see if your school is on there and to get contact info for your state's educational service agency.
What is “Automatic School School Discharge?”
If you met the eligibility requirements above and have not enrolled in a comparable educational program within three years of your school closing, you may receive your closed school loan discharge automatically.
To qualify for an automatic closed school discharge, you must have attended a school that closed after Nov. 1, 2013 and before July 1, 2020. If you're eligible for an automatic discharge, the U.S. Department of Education (ED) will notify your loan servicer which should then, in turn, notify you.
Are there other student loan forgiveness programs?
Yes! Even if you don't meet the closed school loan discharge requirements, you may qualify for other federal forgiveness programs.
One of the most attractive programs is Public Service Loan Forgiveness (PSLF). If you work for a qualifying employer, you could receive tax-free forgiveness on your entire remaining balance in as little as ten years (120 qualifying monthly payments).
Other federal forgiveness and discharge options include:
- Teacher Loan Forgiveness
- Total and Permanent Disability Discharge
- Discharge Due to Death
- Bankruptcy Discharge
- False Certification Discharges
Also, remember that federal student loan borrowers can apply for federal forbearance and deferment periods. Note that while general forbearances are available for Direct Loans, Federal Family Education (FFEL) Program loans and Perkins Loans, the COVID-19 0% interest period is only available to Direct Loan borrowers.
Stay informed about your closed school discharge options
If you have attended a school which shut its doors and are wondering what to do next, don’t fret just yet.
In many cases, your federal student loans may be eligible for student loan discharge. The key is to fill out the student loan discharge form. Then talk to your loan servicer about the application process.
It might make sense to transfer to another program and forgo closed school loan discharge. For example, if you have $200,000 of student loans from attending Argosy University's psychology doctoral program, you might be confident you'll earn $80,000 with a PsyD. Without one, you think you'll earn $50,000.
In that case, a payment of 10% of your discretionary income at $80,000 could be the better financial deal over paying nothing but only earning $50,000.
You must analyze closed school student loan discharge on a case by case basis. Feel free to reach out to us or share your experience in the comments below.
Did your college close? What are some of your tips for other borrowers going through the same thing?
Refinance student loans, get a bonus in 2023
| Lender Name | Lender | Offer | Learn more |
|---|---|---|---|
|
$1,000 Bonus
For 100k or more. $200 for 50k to $99,999
|
Fixed 5.24 - 9.59% APR
Variable 6.24 - 9.99% APR
|
|
|
$1,000 Bonus
For 100k or more. $300 for 50k to $99,999
|
Fixed 4.96 - 10.24% APPR
Variable 5.72 - 10.24% APR
|
|
|
$1,000 Bonus
For 100k or more. $200 for 50k to $99,999
|
Fixed 5.19 - 9.74% APR
Variable 5.99 - 9.74% APR
|
Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2023 of whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
I wanted to know if I qualify. I left the college and was supposed to be back. Everyone knew and was okay with it. I recently am coming back and I’m notified that the massage therapy program of my school Brandford Hall is closed. I still have 10,000 to pay for a license/internship/job/experience I did not receive. I’m confused as to what I could do.
Your first step is to apply with your loan servicer and continue making payments because you don’t have anything to lose in applying.
If my school loses accreditation and I’ve completed all the classes, but not the internship required for graduation, will I be eligible for Closed School Loan Discharge if I withdraw before they close?
The closed school discharge mainly has to do with if the Dept of Ed decides the school was defrauding people. I’m not so sure a loss of accreditation will do it for you.
I was attending a automotive school in az,I’m from California. They were not able to certify me for Smog due to the fact there program didn’t cover the clean air act .needed to receive a license in California. They shut the doors and told me the tuition recovery fund would cover the loans but took the money and ran .American tec center Phoenix Az.
Grrr. Try hiring an attorney. Jay Fleischman handles cases in Cali: jay@moneywiselaw.com
I was attending to Phoenix school in California about 10 yrs ago
I was not able to passed a class and my English was not the best, is my second language and when I was going back to reap the class they told that for me to be able to keep going was to pay $1500 and I was not working then I was never able to go back unless I come on with the $1500 now I old them $2000 to the government and the school I’m now disable and I’m 51yrs
I don’t have the money to pay.
What or how can I take care of this problem.
I got a letter from the school I attended Sandford Brown in 06-07 I didn’t finish but I started paying back loans in 2010 I’m in default and working on a payment plan, however I got a letter in the mail advising me that due to a recent settlement with the state attorney’s general, including the Tx attorney general beginning Feb 1 2019 we are foregoing collection on any outstanding balance including interest and fees you owe to Sanford brown such balance will be reduced to 0. This action is limited to the amounts you owe to Sanford brown college and does not remove, replace or cancel any payment responsibilities that you have regarding any federal student loans or any loans owed to other institutions or 3rd parties that are outstanding. My question is does this mean that I don’t have to pay back the student loans since they are collecting on there behalf?
Certainly sounds like it! I would highly suggest reaching out to a student loan attorney like jay@moneywiselaw.com. Ask him for a connection to a competent attorney located in Texas. I would want to verify that the debt is cancelled and an attorney licensed in your state should be able to confirm that.
@Domniono Robertson if you have any information that you could share with me that would be wonderful. I also attended Sanford-Brown College and have a $27K student loan with a bogus degree. Thanks in advice!
I attended Sanford Brown College in 2003 and graduated. Because of the misleading, deceiving, and non-accreditation I have been stuck putting my loan in forbearance all this time because I simply can not afford to pay on my student loan. My loans (now with Navient) are at $27k.
I have not received any letters that my loans will be forgiven because of settlement. Is the settlement only for private student loans or federal? I believe that my student loan is federal but I am not for sure.
Any advice on this would help or what can be done to have my loans removed?
This has been a burden on myself for so many years financially and emotionally.
I’d suggest applying for borrower defense to repayment and see what happens. https://borrowerdischarge.ed.gov/s/?language=en_US That’s the online application. These forgiveness rulings are being held up by the Dept of Ed right now, but you should go ahead and try to get the loans discharged
I went to long technical college in Phoenix Arizona and I was supposed to get refresher courses for life. I now have a medical assistant diploma that has become worthless to me and I still owe 6k on it. I graduated over 10 years ago and was out of work for 4 years. So I have any recourse?
Probably not Rachel if it was me I’d just try to eliminate it so I could move on. If it was 60k I might have a different answer. If you wanted a second opinion consider hiring a student loan lawyer.
Does getting a closed school loan discharge prevent you from getting aid in the future?
I don’t believe so but I’d definitely check on that
Do you have any information about any other loans? I took out a loan at Mr J’s hair Academy In 1989 in the amount of 5,000 dollars. Now they are saying that I owe 39,000. How is that possible. When the cost of the class only cost 5,000 dollars?
Probably because it’s been compounding since payments didnt get made and since student loans cant be discharged in bankruptcy that’s how it happened. Sorry to hear. I’d definitely contact an attorney like jay@moneywiselaw.com to see if you can do something about it.
If I attend a school 14 years ago (never completed) and the school is currently closed down due to fraud do I qualify for loan forgiveness
Generally you have to have been a student while the school closed, but here’s the discharge form if you want to try https://studentaid.ed.gov/sa/sites/default/files/closed-school-loan-discharge-form.pdf
i attended a school that said they get you into the job once out. I completed associates and the continued to work on bachelors online where I had all kinds of problems and then was with drawn from the program cause I was told i took to long to complete even though they wouldnt help figure out my problems and still had no help on getting the job the said they would help get. not long after leaving the school closed and I was left with empty promises and loans I am fighting to pay and a job doing something I didnt go to school for
That’s tough. I don’t think you’d be able to get any discharged unless you were enrolled when it closed.
I took a leave of absence last July which was good for 6 months. However, I never received a follow up about that in January from the school and could not get in contact with anyone as employees were being let go then the school officially closed in March and merged with another school. I’m still trying to get in touch with someone at the merged school to see if am still listed as a student as I never did sign off anything about officially withdrawing. I’m assuming my loan discharge application was denied because it’s been past 120 days since I took a leave. Now I’m in the process of filling out another application to explain why I should not be denied. What “rare” cases are you referring to that would qualify me to have my loans discharged?
The rarest cases are borrower defense to repayment saying you were scammed essentially. The closed school discharge is easier to get if you were a student when it closed. Hence, I think you probably would be listed as a student and if you just want to quit entirely the closed school discharge is definitely worth applying for.
Hi I attended wyotech college for a trade in HVAC school was sued and closed for wrongful and misleading students on so many things my question is I attended in 2007 and lawsuit was I believe in 2015 or so I paid off my private loan but couldn’t afford my federal loan and now is and has been in default for some time am I eligible for a borrower discharge and get my life back thank you very much
Borrower defense to repayment sounds like it’d be your only option. https://borrowerdischarge.ed.gov/s/?language=en_US
Thanks alot travis I appreciate that any advice on how to verbalize it so I have a shot on getting this removed
Sure thing good luck!
It won’t let me unless my enrollment was on or after June 1st 2010 I was in 2007 but def misled with my loans and interest included 100% on job placement totally bogus
I am 100% disabled The only income is social security disability insurance (SSDI) and The Department Of Education has been taking money 10% out of my check. Because of this, I am currently now living in a homeless shelter. While I was attending Kapalan I had a loss of my son who was 19 and a donor. I was dealing with. I told the school about this but they continued to charge me they basically brushed me off.
How can I get this money back. I have tried several times and I have met deadlines and yet they continue to take money out. Can you direct me to where or whom I can get help with this situation?
Thank you,
Lora C
You should apply for a disability discharge. Perhaps one of the lawyers on this might be able to help https://www.studentloanplanner.com/student-loan-lawyer/
Travis – I attended Katharine Gibbs in 2008 school closed in 2009 while I was enrolled didn’t tell us the circumstance and changed name to SBI campus Stanford brown which is not accredited school… Fast forward there was a class action lawsuit to Stanford brown for fraud then they closed… I’ve been paying ppl to help with situation for years no help granted and I’m not understanding why I’m left with 41,000 loan due to a fraud school that they are aware of the credits don’t even transfer I couldn’t even continue my education because I would need to start over and I’m already in a scam debt… I’m in Ny any suggestions they are currently take my wages and tax offset… I’m finding out now there is school closed loan discharge ( do I qualify for that since I took out a loan for Katharine Gibbs that closed when I was enrolled I technically didn’t get a degree at Katharine Gibbs ) because when I finished it was Stanford Brown which I didn’t agree to that change and loan was taken out in beginning all together not like semesters
If you transferred schools from a teach out plan (voluntarily or not) then you wouldnt qualify for closed school discharge and your only option would be to apply for borrower defense to repayment.
Ok so being that they put me in Sanford Brown involuntarily I should be included in the discharge that NY AG passed please read https://ag.ny.gov/press-release/ag-schneiderman-announces-groundbreaking-1025-million-dollar-settlement-profit
I am seeking advice. I went to Westwood and graduated and a year later myfedloan consolidation came on my credit. I’ve done all I know and they won’t remove it. I even talked with myfedloan and I have never been in default and they were paid and consolidated. How can I get it removed from my credit, I don’t owe!
Sounds like you should talk to a student loan lawyer like Jay: jay@moneywiselaw.com
Deville Asset Management is the creditor that is trying to collect on student loans already paid and consolidated within myfedloan. That won’t provide me with anything and dispute comes back as verified but won’t give what has been verified or how.
My collage closed in 2015 a few years after I dropped my classes due to fraud. I recieved a letter from the attorney general a year later reguarding student loan forgiveness. Enclosed was a list of things to complete. I wasnt able to do so because I couldnt remember my loggin and other codes for my classes I was in. My question is do you think I would be able to get my student loans erased?
I think if I was you I’d reach out to your state AG’s office sounds like they cared
I keep seeing that if you attended a school and graduated within 120 days of the school closing that you may qualify for the Closed School Discharge. Is this correct? I’m seeing conflicting information.
I believe that’s the case. Basically the closed school discharge if you qualify is much easier to get than borrower defense to repayment.
I attended CHI institute in the 2004 , later it changed to Brightwood Institute. I was paying for it out of pocket; then later I had agreement with this school to pay monthly in the amount of $50 after I graduated. I had setup an autopayment with my bank for this remaining balance since graduation. Recently, Brightwood rejected my payments. The money sent back to my bank. Next, the debt collector sent me a letter which asked me to pay for the amount on the behalf of Brightwood. I did not want to pay to the debt collector, ONLY to Brightwood. Should I continue to pay for the balance with the debt collector? I greatly appreciate for any advise!