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. Westwood college loan forgiveness is an option because it is one of the schools that has permanently closed. 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 if your school closed.
Closed school discharge
Let’s start with some good news. It is possible to get your federal student loans 100 percent 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, if you meet the eligibility requirements.
If you have Direct Loans, FFEL Loans or Perkins Loans, you may be eligible for student loan discharge if you meet the following criteria:
- You were a student and enrolled in college at the time the school closed
- You were on a leave of absence that was approved by your school at the time the school closed
- You withdrew from school and your school closed within 120 days of that period
If you meet one of these criteria, you may be eligible for 100 percent student 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
It’s important to note that this information is regarding federal student loans only. If you have private student loans and your school has closed, you will 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 will have to apply to get your loans discharged.
First, fill out the Closed School Loan Discharge Application and send it to your 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 learn about next steps.
Paying back your student loans
In what cases might you not qualify for a student loan discharge if your school closed? You may not be eligible if you have private student loans. Awful, I know, but it really depends on your lender. Contact them ASAP to find out about any student loan discharge options.
You may also be offered a “teach out”, which allows you 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 will not have to pay back your federal student loans.
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, talk to your loan servicer about the application process, and figure out the next steps for your education.
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.
Since $200,000 in federal student debt is a lot like $400,000 in student debt (meaning you pay the same percentage of income), you want to think about your loans as a tax, not as a debt.
In that case, a payment of 10% of your 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?