Lawsuit Calls on Department of Education to Provide Relief to Students Whose Schools Closed

By Margaret Mattes

Tens of thousands of student borrowers unable to complete their educations at the approximately 1473 postsecondary schools or campuses that closed between November 2013 and November 2015 nationwide are now entitled to have their federal student loans immediately discharged—i.e., cancelled. As of October 16, 2018, the U.S. Department of Education is legally required to discharge federal student loans of eligible students impacted by closures during that time period without requiring the student to apply for relief.

But the Department has failed to do so. In a complaint filed in November, the National Student Legal Defense Network (NSLDN), on behalf of Housing and Economic Rights Advocates, claims that the Department has “unabashedly and intentionally” refused to implement rules requiring it to automatically discharge certain student loans. Despite the requirement that the Department “must grant automatic discharges to students whose schools closed on or after November 1, 2013, and who do not re-enroll at another Title IV-eligible institution within three years of their school’s closure date,” the complaint alleges that the Department continues to collect on these loans. The lawsuit asks the court to order the Department to implement the rules requiring automatic closed school discharges immediately. NSLDN estimates that if the automatic closed school discharge rule were implemented, $250 million in student loan debt would be immediately canceled.

The current administration’s opposition to providing automatic relief to students impacted by school closures is no secret. It has repeatedly delayed implementing the automatic closed school discharge regulation. But a federal court held earlier this year that these delays were illegal and ordered the Department to put the regulations into effect.

Who is eligible for an automatic closed school discharge? 

Federal student loan borrowers are eligible for an automatic closed school discharge if:

• they were enrolled at a school or campus that closed after November 1, 2013 at the time of closure or withdrew within 120* days of the date the school closed, and
• they did not complete their educational program, and
• they did not re-enroll in another school that participates in the federal student loan program within three years of their schools’ closure date.

Students in schools that closed after November 2015 are thus not yet eligible for automatic debt relief.

Massachusetts Closed Schools Whose Students May Now Be Eligible For Automatic Loan Discharges

This chart represents a partial list of schools or campuses in Massachusetts that closed between November 2013 and November 2015. If you attended one of these institutions within 120 days of the date the school closed and did not complete your educational program, you may be eligible to have your federal student loans canceled.

Source: Federal Student Aid, U.S. Dep’t of Educ., “Closed School Weekly/Monthly Reports.”

Borrowers can still apply for a closed school discharge rather than waiting for automatic relief.

Whether or not a borrower is eligible for an automatic closed school discharge—ie, a discharge without applying—borrowers who were harmed by their school’s closure can still apply for a closed school discharge now rather than waiting for automatic relief from the government. And borrowers who apply for a discharge do not have to wait three years from their school closure to get it. Borrowers are generally eligible for discharge upon application if:

• they were enrolled at a school or campus that closed at the time of closure or if they withdrew within 120* days of the date the school closed, and
• they did not complete their educational program at their school, through a teach-out, or by transferring credits to another school.

More information about who is eligible for a closed school discharge and how to apply is available here as well as on the Department’s website.

Do you believe you are eligible for automatic forgiveness of your student loans because your school closed between November 2013 and November 2015? How has having student loans for a school that closed impacted you? Tell us your story.

 *120 days is the general rule, but sometimes the Department recognizes “exceptional circumstances” for which it approves discharges for people who withdrew more than 120 days before closure.