Closed School Discharges
The Department of Education now offers 100% Federal Student Loan Forgiveness benefits to anyone with debt from a school that shuts down before they’re able to finish their education program.
Called a “Closed School Discharge”, this forgiveness program offers complete forgiveness for anyone with Federal Direct Loans, Federal Family Education Loans (FEEL Loans), or Federal Perkins loans, when your school shuts down while you’re enrolled, or just after you’ve left.
Please note that even if you do not qualify for the Closed School Discharge, you may still be able to challenge the validity of your debt via Defense Against Repayment. You may create all the paperwork for this process yourself, or hire on a private company who specializes in that process.
If you’re going to outsource the work instead of doing all the research yourself, then I recommend contacting the Student Loan Relief Helpline, which is an agency entirely devoted to helping people figure out how to get rid of their student loan debt (without having to pay for it!).
You can reach the Student Loan Relief Helpline by calling them at 1 (888) 906-3065.
Closed School Discharge Eligibility Rules
You can qualify for a Closed School Discharge if your school closes under one of the following circumstances:
- The school you’re attending closes while you’re still enrolled, and you aren’t able to complete your education program because of the closure
- The school you were attending closes within 120 days after you withdrew from their program
This program has been popularized by two recent closures of enormous For-Profit Schools: first, the Corinthian Colleges system in 2015, then the ITT Tech Schools closure in 2016. For details on getting a discharge from either of these schools, please visit my pages about the Corinthian Colleges Student Loan Forgiveness Program, or the ITT Tech Student Loan Discharge Program.
What’s especially awesome about this program is that you can still qualify for the Closed School Discharge even if you were on an approved leave of absence from the school when they shut down, as the Federal Government would still consider you to have been “enrolled” even though you were out on LOA.
Conditions that Ruin Your Eligibility
If you fall under any of the following categories, then you will not be eligible for a Closed School Discharge:
- The school closed more than 120 days after you withdrew from courses
- You’re now attending a similar educational program at another school, after having transferred academic credits from the school that shut down, through a “teach-out” agreement, or by any other comparable means
- You completed all the required coursework in the program, even if you didn’t yet get your official diploma or certificate for completion
Basically – the program was created for people who ended up screwed when their school shut down, with no way of continuing the program they’d racked up student loan debt to pay for.
The Closed School Discharge Process
How do Closed School Loan Discharges actually work? It’s relatively simple.
- Contact whoever services your loans. This is the company or organization that you send your monthly student loan payments to. Since each servicer has a different applications process, you’ll need to get in touch with whoever services your debt to figure out what they need to process your application.
- Once you’ve received the application paperwork from your loan servicer, fill it out completely, then submit it via whatever means they allow (some loan servicers allow Internet-based applications, while others will need them faxed, or sent via snail mail).
One important thing to keep in mind is that you’ll need to continue making payments until your loan servicer tells you (in writing) that you don’t have to issue them anymore.
As you will not be approved for a discharge until you’ve received the official paperwork, any payments you miss after applying (but before receiving approval) could lead to financial problems.
If you’re having trouble getting the paperwork from your loan servicer, then you can grab the 2016 Closed School Discharge Application Form here instead.
Note that the link above is to the official Federal Government application form, which you can fill out and then submit to whoever services your loans.
Who Is My Loan Servicer?
If you don’t know who services your loans, there are a few simple ways to sort that out.
- The easiest way to figure it out is to look at your monthly student loan bills to see who your payments are being sent to. You can then try Googling their name and address, and should be able to quickly identify the company and find their contact information.
- Another way to get the details is to use the Federal Government’s official website, called the “My Federal Student Aid” site, and located here. Visiting this site and logging in will allow you to pull the relevant details you need to complete your Closed School Discharge application.
- If you can’t sort out the website login, then you can call the Federal Government’s official student aid phone number at 1-800-4-FED-AID (1-800-433-3243) and ask them who services your loan.
If you STILL can’t figure out who services your loans after trying all of the above, then you probably won’t be able to sort out your Closed School Discharge paperwork, and I would absolutely recommend enlisting the help of one of the paid services available.
These companies will handle the entire process for you, typically for a few hundred dollars, and my favorite company that offers this service is called the Student Loan Relief Helpline, who you can reach by calling 1 (888) 906-3065.
State Tuition Recovery Fund Refunds
If you’ve been affected by a school closure, then you may also be eligible to get a refund from your state (which comes in addition to the Federal Government money you’ll be getting), through the State Tuition Recovery Fund program.
To find out if you’re eligible for this benefit, you need to contact your state’s Postsecondary Education Agency.” This is the group that runs higher education in your state, and who is responsible for determining laws, monitoring compliance, enforcing regulations, etc.
To figure out who you need to talk to, simply head to Google and search the phrase “YOURSTATE Postsecondary Education Agency”. Obviously, replace “YOURSTATE” in the previous sentence with whatever state you live in.
As an example, if you’re from Texas, you’d search the phrase “Texas Postsecondary Education Agency”, and you’d get results with their website, phone numbers, email addresses, etc.
Contacting this agency will allow you to see if you’re eligible for any State funds, and it’s worth checking, because a five minute phone call could save you thousands of dollars.
If you don’t want to get your debt discharged because you’re interested in finishing your higher education program without having to start all over, then you should know that your other option is retaining the credits you earned at the school who closed via process known as credit transfer.
It’s possible to apply for transferring credits earned from the school which closed to a new school, who offers a comparable program, and then to finish up your degree or whatever program you were enrolled in at the new destination.
Please note that this will invalidate your opportunity to receive the Closed School Discharge, but it will allow you to continue with your education program without the setback of lost time and effort.
Applying for the Discharge means that you get all your money back, but essentially all the time you spent in school ends up being wasted. For some students, it makes more sense to transfer credits and finish the program than it does to get the money back (especially if you’re really close to finishing).
Frequently Asked Questions
Many people are being affected by schools closing down, and it’s likely that this population will only increase moving forward, since there are several very large for-profit school systems that are having trouble staying open for business.
Below you’ll find some of the most common questions regarding the Closed School Discharge program. If you don’t see your question listed below, please feel free to post in the comments section at the bottom of this page and I will do my best to answer your question as quickly as possible.
My School Shut Down. What Should I Do?
You either need to apply for for the Closed School Loan Discharge, which is outlined above on this page in detail, or you need to apply to transfer your credits to another school, where you can finish your education program.
The choice is up to you, and depends entirely on your unique educational and financial situation. People with a ton of debt will probably want to choose the discharge, while people really close to completing their educational program will probably want to apply for transfer credits.
How Can I Find Out How Much I Owe?
Check the section of this page above called “Who Is My Loan Servicer”, which details the process of figuring out who services your loans.
Once you know who services your loans, you can contact them to ask how much money you still owe, and then determine which option (the Closed School Discharge or the Transfer Credit process) will work best for you.
What Is A Loan Discharge?
It’s the same thing as “Loan Forgiveness” – a complete wiping out of all the debt that you still owe, but in the case of the Closed School Loan Discharge program, it’s even better… because this program doesn’t just forgive your remaining debt… it also REFUNDS everything you’ve already paid.
And that’s what makes Closed School Loan Discharges the single best way to Erase Student Loan Debt Without Paying For It.
If you qualify for this program, you should absolutely take advantage of it!
How Does a Discharge Affect My Credit?
Because you’re going to get a refund for any and all payments you made previously on your eligible student loan debt, either voluntarily or through forced collection processes (like wage garnishments, etc.), your credit is likely to be impacted.
If you had credit problems resulting from your student loan debt, then those are likely to clear up, because your discharge will be reported to the credit bureaus and any negative activity on your report will be cleared.
Is There An Application Deadline?
Fortunately, there’s no deadline for applying to the Closed School Discharge program.
No matter when your school shut down, no matter how long it’s been, you can still apply for the discharge, as long as you haven’t already transferred your credits elsewhere.
And that’s another great thing about this program, because many people won’t even find out about it until long after their schools have shut their doors.
Where Can I Ask Other Questions?
Please ask questions that aren’t answered here in the comments section below, and I’ll try to answer then within 24 hours.
Alternatively, call whoever services your loan to ask them for details about the Closed School Discharge program, or try calling the free Federal Student Aid Information Center at: 1-800-4-FED-AID.
Or, if you want to pay a company to deal with the process for you, call my favorite company called the the Student Loan Relief Helpline, at 1-888-906-3065.
You’ll have to pay several hundred dollars for their assistance, but they will handle the entire applications and approvals process for you, battling with loan servicers, the Federal Government, or anyone else that is involved in the process.
If you have trouble understanding how this works, managing detailed paperwork and filling out applications, then it may be worth paying someone like the Student Loan Relief Helpline to take care of it all for you.
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