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 (called a “lookback period”). The government may extend the 120 day period in certain circumstances. In new rules announced in September 2019, the Department changed the time period to 180 days for loans issued after July 1, 2020. These rules went into effect July 1, 2020, but this could change again due to legal challenges or other factors.
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. Parent PLUS loan borrowers should be eligible if the school closed before the child completed the program.
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.
Recent School Closures
This is a partial list of the schools that have closed since 2016. There is more information about these closures and more schools listed on the Department’s web site. The Department keeps a list of all campuses that have closed here (to download the excel file with the list of campuses, click here).
Charlotte School of Law: Charlotte School of Law was a for-profit law school in North Carolina that closed in August 2017. See the Department’s fact sheet. The Department of Education announced that it would extend the 120-day lookback period for students who attended Charlotte school of law and would grant eligibility for students who attended the school on or after December 31, 2016.
Corinthian, Inc.: Corinthian was a large for-profit chain of schools. The company closed schools over time and then filed for bankruptcy in 2015. The schools included Everest (College, University, on-line), Heald College, and WyoTech.
The Secretary of Education extended the 120-day time frame for closed school discharge eligibility to include any Corinthian student who withdrew from one of its closed schools on or after June 20, 2014. The Department has posted extensive information about debt relief for Corinthian students and has developed special borrower defense discharge processes for specific groups of Corinthian Colleges students.
Argosy University, Art Institutes, and South University: The Art Institutes, Argosy University, and South University were owned by the same corporate owners, first EDMC and then Dream Center Education Holdings. When the schools changed ownership in 2016, a number of campuses closed. Then, in 2019, Dream Center Education Holdings entered receivership (often a precursor to bankruptcy) and closed almost all of its remaining Art Institutes, Argosy, and South University campuses. The Department posted information about the Dream Center closures here and here.
In November 2019, the Department announced it would automatically cancel loans and restore Pell eligibility for students who attended Art Institute of Colorado or the Illinois Institute of Art between January 20, 2018 and December 31, 2018. The Department also announced that it would extend the lookback period for closed school discharges for students who attended another 24 Dream Center schools that closed in December 2018. Students who attended a Dream Center campus on or after June 29, 2018 (or on or after January 20, 2018 for borrowers who attendedjust the Illinois Institute of Art campuses or the Art Institute of Colorado campuses) and who did not complete their program or transfer the credits attained at a Dream Center school to the same program at another school may be eligible for a closed school discharge.
Student Defense has posted a guide to extended closed school loan relief for Dream Center Students.
Education Corp. of America: The Education Corp. of America was the corporate owner of Brightwood Career Institute, Brightwood College, Ecotech Institute, Golf Academy of America, New England College of Business, and Virginia College. After months of financial troubles and declining student enrollment, the company announced its closure in December 2018 and filed for a receivership, closing campuses in 18 states. The Department has issued a fact sheet for students affected by the company’s closure.
Globe University and Minnesota School of Business: Globe University and Minnesota School of Business was a for-profit school that filed for bankruptcy in November 2019. The Attorney General of Minnesota sued the school for defrauding students enrolled in its criminal justice program. The U.S. Department of Education extended the lookback period for students from Globe University and Minnesota School of Business, and students who attended the schools on or after September 8, 2016 are eligible for a closed school discharge. The Department has issued a fact sheet for students affected by the schools’ closure. The Minnesota Office of Higher Education has posted information for students who attended these 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 posted information specifically for ITT students, including answers to FAQs. The Project on Predatory Student lending has posted more information for former ITT students including about a group of former ITT Tech students who filed claims in ITT’s bankruptcy proceedings in the Southern District of Indiana. In June 2019, the CFPB and 44 states’ attorneys general settled with Student CU Connect CUSO LLC (or the CUSO), a group of credit unions that issued private loans to ITT students, which stopped the collection of all outstanding private loans issued by that lender.
Regency: All Regency Beauty Institutes 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.
Vatterott College. In December 2018, Vatterott College, which also included L’Ecole Culinaire and ex’treme Institute, announced it would immediately close its school campuses. The Department published a fact sheet for Vatterott College students here.
Closed School Loan Discharge Eligibility
You are eligible for a closed school discharge only if you were unable to complete your educational program because your school or campus 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.
If you attended your school within 120 of its closure (for loans issued before July 1, 2020) or 180 days of the school closure (for loans issued after July 1, 2020) and you meet the other criteria listed here, you should be eligible for a closed school discharge.
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 after transferring the credits or hours earned at the closed school to another school. This exclusion should only apply if the program you complete at another school is the same or comparable to your program of study at the closed school. Although there is no standard definition of a “comparable program,” the Department has issued guidance to schools about the factors it considers when making this determination. (You can see examples of how the Department defines a “comparable program” in question 15 in this list of FAQs). The factors may include: 1) the academic or professional nature of the two programs; 2) the similarity in course requirements; 3) the treatment of transfer credits by the institution accepting the creditors and 4) the disposition of a state approving agency or accrediting agency on the comparability of the programs.
You should be eligible for the discharge if you enroll in the same program at another school, but do not transfer any credits from the closed school. Also, you should still qualify if you transfer credits from the closed school to a completely different program of study at a new school. If you are denied a discharge despite fulfilling either one of these criteria, you should contact a legal services provider to discuss your options.
You are not eligible for a closed school discharge if you completed all of your coursework before the school closed, even if you did not receive your final diploma or certificate.
The Department made some significant changes to the teach-out provisions in new rules published in September 2019. These new rules only apply to borrowers seeking closed school discharges for loans disbursed on or after July 1, 2020. For loans issued after July 1, 2020, a closed school discharge is only available if the student does not accept the option to enter the teach-out offered by their school.
The Department says that you are not eligible if you completed all of the coursework before the school closed even if you did not receive a diploma or certificate.
You should push back if you receive an erroneous decision after applying for a closed school discharge. This blog from the Project on Predatory Student Lending provides tips on common Department errors and how to respond.
How to Apply for A Closed School Discharge
In most cases, you will have to fill out a closed school discharge form to apply. (There are limited cases in which the government will accept an oral application). 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. The Department has a list of official school closure dates on a spreadsheet here. 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. And given the history of errors, you should appeal if you believe a date is inaccurate. Possible sources of information or evidence include dated newspaper articles or other media reports about the school’s closure. You might also try to collect signed statements from other students, state regulators, or former school employees about the closure date.
You should 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 to your loan holder by certified mail and get a receipt. Perkins Loan borrowers must apply to the school that made the loan or to the loan servicer the school has designated.
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.
If your discharge is approved, the Department will also restore Pell Grant eligibility for grants you received to attend the closed school. This is important because there is a lifetime eligibility limit on Pell Grants. The Department has provided guidance on how it will make sure that borrowers receive this benefit. According to the Department, “Students whose eligibility may change as a result of this policy will be notified when their available limits to receive Pell Grant funding have been adjusted.” According to prior guidance, 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.” Get more information about Pell grant eligibility limits.
You can appeal to federal court if your application is denied. If your application was denied by a guaranty agency, you can first request that the Department review the decision. The Department may also consider requests for review for Direct Loan discharge denials. However, in new rules released in September 2019, the Department said that it did not think it was necessary to create an appeal process for borrowers making claims for closed school discharges. According to the Department, if the claim is denied but borrowers have additional supporting information, they can always submit a new claim and still receive full relief.
Automatic Closed School Discharges
You are eligible for an automatic discharge if you attended a school that closed between November 1, 2013 and July 1, 2020, you otherwise meet the eligibility criteria discussed above AND you did not enroll at another school within three years of the date the prior school closed. This discharge will be initiated by the U.S. Department of Education (ED), and you will be notified by your loan servicer, but you do not have to wait three years if you are eligible and want to apply earlier on your own.
If you are eligible for an automatic closed school discharge and you previously submitted a borrower defense application, the Departments says it will close the borrower defense claim, grant the closed school discharge and notify you.
This is a new program and the Department provided guidance about it in December 2018.
However, in new rules published in September 2019, the Department eliminated this automatic closed school discharge for schools that close after July 1, 2020. These rules went into effect July 1, 2020.
In September 2019, the Department announced that it started granting automatic closed school discharges for eligible borrowers who attended ITT Tech. The Department said it will send out pre-notification emails. (For more infomraiton about the ITT discharges, see this statement from Office of Senator Dick Durbin).
New York Legal Assistance Group has challenged the new rules and their removal of automatic closed school discharges for borrowers who receive loans after July 1, 2020. More information on that case is available here.
Getting Transcripts and Records from Closed Schools
You may have trouble getting your academic records after a school has closed. The Department advises that you should contact the state licensing agency in the state in which the school was located to get information about locating your records. Prior to closing, schools are supposed to make arrangements for students to access academic records indefinitely. Your school must provide information about your academic transcripts once the location has been determined.
Closed Schools and Veterans
The VA may partially restore GI bill entitlement to students affected by a school closure or disapproval. You may qualify to restore your GI Bill eligibility for the term, quarter, or semester if you could not complete your course work before the school closed. If you finished the term, you most likely are not eligible for restoration. Visit the GI Bill restoration website for more information about applying for benefit restoration.
To learn more about your options or speak with a representative about your GI Bill benefits, contact the VA’s Education Call Center at 1-888-442-4551. If you’re interested in transferring your credits to another institution, the Department encourages you to use the GI Bill Comparison Tool to find the program that’s right for you. You can get more information about this issue from the Veterans Education Success web site.