The rules around closed school discharges can be confusing—for students and for those trying to assist them—and good information can unfortunately be hard to find. We have heard that a lot of incorrect information is circulating on message boards. It’s important to know the facts before making a decision about transferring credits or applying for a closed school discharge, or before advising a borrower on these decisions.
We covered the basic rules about eligibility, relief, and how to apply for closed school discharges, as well as factors students should consider when thinking about whether to apply, in last week’s blog post. Below are answers to questions we have gotten about how the closed school discharge works and what students need to know.
Q: How quickly do former ITT students have to decide whether to transfer to complete their program at a new school versus applying for a closed school discharge?
A: Students can take their time making this decision. There is no deadline to apply for a closed school discharge, and for federal loans, students generally have a 6-month grace period after their enrollment ends before repayment starts. Moreover, if a school or recruiter is hurrying a student to sign up to transfer credits or enroll right away, that’s a red flag that the school may be more interested in boosting its enrollment numbers than the best interests of students.
That said, it is a good idea for students to get a copy of their ITT transcript as quickly as possible, as there may be delays or it may be harder to access transcripts later on. The Department of Education has information about how to request ITT transcripts here at number 6. It is also a good idea for students to figure out how much federal student loan debt they have before making a decision. Students should contact their servicer for information about their total student loan balances. (More tips on accessing federal student loan information are here.)
Q: If a former ITT student enrolls in a completely different program at a new school, would transferring general education credits from ITT to the new school make her ineligible for the closed school discharge?
A: No, the Department of Education has stated that transferring ITT credits to a new school only makes a student ineligible for a closed school discharge if the credits are used to complete a program that is the same or comparable to the one the student was unable to complete at ITT. (The Department addresses this here at number 10.) There is not a lot of guidance as to what programs are “similar” or “comparable,” but sometimes it should be reasonably clear. For example, a student who was working on completing a nursing associate degree program at ITT would be ineligible for a closed school discharge if she transferred her ITT credits to another school and completed a nursing associate degree program there. But if the student studying nursing at ITT had instead transferred credits to another school to complete a business administration degree, that program would likely be considered different—and so the student would still be eligible for a discharge of the loans she took out to attend ITT.
If you look at the closed school discharge application, you’ll see that question 13 asks if the student completed or is in the process of completing the “same or a comparable program.” If the student transferred credits to a completely different program, she should answer “no” to that question to preserve her eligibility for a closed school discharge.
Q: If a former ITT student transfers some but not all ITT credits to complete a program at another school, is the value of those credits deducted from the total discharge the student can get? For example, if a student is able to transfer 10 of her 20 ITT credits into a program at a new school, is the student eligible to cancel half of her ITT loans?
A: No, the closed school discharge is “all or nothing”—the borrower is either eligible for a complete discharge of all of her federal loans taken out to attend ITT or she is ineligible for any closed school discharge. The number or portion of credits transferred does not matter and does not change the amount of loans that can be cancelled.
But remember, eligibility for the discharge depends on whether the program at the new school is the “same or comparable” to the ITT program (see above). So if a student transfers any ITT credits to another school and completes the same or a comparable program at that school, then she will be completely ineligible for a closed school discharge. (Borrowers who do not qualify for a closed school discharge because they transfer some of their credits to complete their program at a new school may want to seek full or partial loan cancellation through another discharge program, such as by asserting a borrower defense to repayment, but the criteria for that discharge are much less clear and relief would be uncertain.) If an otherwise eligible student transfers some ITT credits—such as general education credits—to complete a different, non-comparable program at a new school, then the borrower is still eligible to have all of her federal student loans taken out to attend ITT discharged.