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.
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. 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.
ALERT: The CFPB posted information about applying for closed school discharges. This is particularly relevant for students at Corinthian schools that are closing or may be closing. NCLC wrote an open letter to the Department of Education urging them to put Corinthian students first. Stay tuned for more information.
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, 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.
If the address to which you are requested to send payment is the National Payment Center in Greenville, TX, 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. 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 Stafford and PLUS Loan borrowers must apply to the Department of Education and FFEL borrowers should apply to the lender or agency holding the loan. If this is a guaranty agency, the agency is supposed to respond within 90 days. If the discharge is granted, you are no longer obligated to repay the loan or any charges or costs associated with the loan. You are no longer in default on these loans and the loan holder must help clean up any damage to your credit history. You may appeal to federal court if the discharge is denied.