Closed School
|
On This Page: |
This discharge is available if you attended a school that closed while you were enrolled or if you withdrew within 90 days of the school’s closure. Only loans received at least in part on or after January 1, 1986 may be discharged. FFEL and Direct Stafford loans, PLUS, and Perkins loans are eligible.
Consolidation loans are trickier. A consolidation loan usually consists of a number of underlying loans. If any of these underlying loans could be canceled, you can apply for a closed school cancellation for these loans only. If granted, you will receive a credit for the amount of the underlying loans related to the closed school.
You are eligible for a closed school discharge only if you were unable to complete the educational program due to the school’s closure. If a school had a number of different branches, you must have been attending a branch that closed.
The Department of Education has a list of official school closure dates. Click here to see this list. You may petition the Department if you have proof that the date on the official list is incorrect. This is difficult, but not impossible, to do.
If the discharge is granted, you are no longer obligated to repay the loan or any charges or costs associated with the loan. In addition, you have the right to be reimbursed for all amounts paid on the loan, whether those payments were voluntary or involuntary. You are no longer in default on these loans and the loan holder must help clean up your credit history. If the discharge is denied, you may appeal to federal court.
How to Apply for A Closed School Discharge
In most cases, you will have to fill out a closed school cancellation form to apply. (There are limited cases in which the government will accept an oral application). The form is available on the Department of Education’s web site.
Section 2 of the form requires you to fill out the name and address of the closed school, the date it closed, and dates that you attended the school. The school closure date is defined in section 5 of the form as the date that the school stopped providing educational instruction in all programs, as determined by the U.S. Department of Education. This is the official school closure date described above and listed here.
It is a good idea to send any supporting information along with the application. This includes any information that helps prove that you were enrolled in the school when it closed. You should send the application by certified mail and get a receipt.
There is no deadline to apply for this discharge. Perkins Loan borrowers must apply to the school that made the loan or to the loan servicer the school has designated. Direct
If the discharge is granted, you are no longer obligated to repay the loan or any charges or costs associated with the loan. In addition, you have the right to be reimbursed for all amounts paid on the loan, whether those payments were voluntary or involuntary. You are no longer in default on these loans and the loan holder must help clean up your credit history. If the discharge is denied, you may appeal to federal court.
A: Yes. The government may extend this period if exceptional circumstances apply. The government has also increased the period for borrowers that attended certain correspondence schools.
Q: Can the government deny the discharge if my school closed but I completed the program at another school?
A: Under current regulations, yes. You must have been able to complete the program by transferring credits earned at the closed school to another school or if the two schools had a written “teach-out” agreement allowing students to complete their courses at another school if their original school closes.
Q: Is there anything I can do to stop collection while I am waiting for a response to a closed school discharge application?
A: Yes. One strategy is to request forbearance. Interest will continue to accrue, but collection will stop. If you want to go back to school before a decision on the discharge is made, you should consider reviewing repayment, loan rehabilitation, and consolidation options.
Q: Can you borrow to return to school if the decision on your discharge is pending?
A: If you are in default, but want to go back to school before a decision on the discharge is made, you should consider reviewing repayment, loan rehabilitation, and consolidation options.
Q: What if I was on a leave of absence when the school closed?
A: A student on an approved leave of absence is treated as if she is still enrolled. If you did not return to school after a leave of absence, the withdrawal date will be the date that the school determined that you began the leave of absence. For purposes of a closed school discharge, a student on an approved leave of absence who tried but could not return to the school because it was closed should still be eligible for the discharge.
Q: What kind of proof can I submit if I think that the official school closure date is wrong?
A: Possible sources of information include dated newspaper articles or other media reports about the school’s closure. You might also try to collect declarations from other students, state regulators, or former school employees about the closure date.