The closed school discharge is available if you attended a school that closed while you were enrolled or if you withdrew 120 days before the school’s closure. (Note that the period changed from 90 days to 120 days as of July 1, 2014).
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.
ALERT: Information for Corinthian Students
A closed school discharge normally only applies to students who withdrew (without completing their program) within 120 days of the school’s closing date, or were attending when the school closed. But for Corinthian students, the Secretary of Education has extended the time frame to include any Corinthian student who withdrew from one of its closed schools on or after June 20, 2014. You can find a list of schools closed by Corinthian on April 27, 2015 here.
Information for Borrowers who Attended ITT and Other Closed Schools
ITT Schools: The parent company of ITT Technical Institute and Daniel Webster College stopped offering courses on September 6, 2016. The company since filed for bankruptcy. The Department has posted information specifically for ITT students, including answers to FAQs. If you were attending ITT when it closed or withdrew within 120 days of the closure (or longer in extenuating circumstances), you may apply for a closed school discharge. You should also consider whether you are eligible for relief from a state tuition recovery fund. If you are not eligible for a closed school discharge, you should consider other options for relief including possibly false certification discharge or defenses to repayment.
Regency: Regency Beauty Institute closed on September 28, 2016. At the time of the closure, Regency was operating in 19 states at 79 locations. The Department of Education has posted information related to this closure, including a series of national webinars for Regency students.
The Department has posted a list of other closed schools and information about relief. Charlotte School of Law is one of the most recent closures. The Department released guidance for these students in August 2017.
Closed School Loan Discharge Eligibility
You are eligible for a closed school discharge only if you were unable to complete the educational program because your school closed. If a school had a number of different branches, you must have been attending a branch that closed. If you were attending an online program, the physical headquarters of your online school must have closed.
You will not be eligible for a closed school discharge if you complete your program through a teach-out at another school or if you complete the program at another school through the transfer of one or more credits from the closed school. The closed school discharge form states that this provision only applies if the program you complete at another school is the same or comparable to your program of study at the closed school. You should be eligible if you enroll in the same program at another school, but do not transfer any credits from the closed school. (See Closed School Tips and FAQs for more information).
The Department of Education has a list of official school closure dates. 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.
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). Section 2 of the form requires you to fill out the name and address of the closed school and the date you attended. Unless you were on a leave of absence or withdrew before the school closed, the last date of attendance should be the same as the date the school closed. 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 on a spreadsheet 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, such as your enrollment agreement. You should send the application by certified mail and get a receipt.
If the address to which you are requested to send payment is the National Payment Center in Greenville, TX, the Department has said that you should submit your completed form to: United States Department of Education Federal Student Aid Processing Group Regional Office, Room 8633 50 Beale St. San Francisco, CA 94105-1813. Otherwise, you should submit your application to whoever holds your loans, such as your loan servicer. This address may change, so it is a good idea to check with your servicer. 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.
ALERT: The Department issued final regulations in November 2016 that require closed school discharges without an application for qualified borrowers who attended schools that closed November 1, 2013 or later and did not re-enroll in a school participating in the federal aid programs within a three year period from when the school closed. The Department stated that it will implement this provision early, but has not yet set a date. Stay tuned!
If the discharge is granted, you are no longer obligated to repay the loan or any charges or costs associated with the loan. Any money you paid should be refunded. You are no longer in default on these loans and the loan holder must clean up any damage to your credit history. You may appeal to federal court if the discharge is denied.
The Department will also restore Pell Grant eligibility for grants you received to attend the closed school. This is important because there is a life time eligibility limit on Pell Grants. The Department has provided guidance on how it will make sure that borrowers receive this benefit. The Department says that it will send notices to borrowers after they make adjustments to the Pell Grant lifetime eligibility amount. Borrowers are then instructed to take the notices to their school financial aid offices to find out if the restored eligibility allows for any additional Pell Grant funds.