If you were unable to complete your program because your school closed while you were enrolled, or if you withdrew from school shortly before it closed, you may be eligible for a closed school discharge. Additionally, if the campus you were attending closed, but the rest of the school’s campuses remained open, you may also be eligible for a closed school discharge.
If your closed school discharge application is granted, the Department will cancel the loans you borrowed to attend the closed school, give you a refund of payments made on those loans, and have any negative credit history for those loans deleted from your credit report.
When your college or university closes while you are enrolled, you have a couple of options:
- You can choose to complete your program through a teach-out (either at the same school or at another school), or
- You can apply to have your student loans canceled through a closed school discharge.
What is a teach-out?
When a school or campus closes, it is supposed to create a teach-out plan. The teach-out plan may be at the closing school itself or the closing school may work with other schools or campuses nearby to allow students to finish their program. If your school or campus closes, and you decide to continue your education through a teach-out, you will not be eligible to have your loans canceled under the Closed School relief program. Instead, it may be better to take the closed school discharge and later transfer your credits to another school outside of the teach-out agreement. You will still be eligible for Closed School relief if you transfer to a program outside of the teach-out plan.
Note: If you complete your program via a teach-out, you will not be eligible to have your student loans canceled through a closed school discharge.
I Did Not Complete My Program and My School Closed. How Do I Get Closed School Relief?
There are generally two ways to be eligible for a closed school discharge if you did not complete your program:
- You were enrolled in the school when it closed, or
- You withdrew from the school within 120 or 180 days of it closing (depending on when your loans were issued).
You can apply for a closed school discharge by filling out a closed school discharge application and submitting it to your federal loan servicer.
New rules for the Closed School program were supposed to take effect on July 1, 2023 that would have made it easier for a borrower to obtain a closed school discharge. Unfortunately, a legal challenge has temporarily stopped the Department of Education from using those rules, so the old rules are still in effect.
Do Not Rush to Complete Your Program via a Teach-Out
If you’ve learned that your school is closing, it is important to take your time before making a decision about what to do next. If the school is pushing you to enroll right away in a teach-out program or is pushing you to complete the same program at another campus, you should carefully consider your options. You will not be eligible to have your loans canceled through a closed school discharge if you complete the program through a teach-out.
Things to consider before transferring credits into a similar program at another school
Under the Closed School Discharge rules that are currently in effect, borrowers will not be able to discharge their loans from the closed school if they transferred even one credit from their closed school into a “comparable program” to the one they were in at the closed school. While the new rules being challenged by a lawsuit in federal court do not have this requirement, the Court has ordered that they may not use the new rules until the lawsuit is over, and it is too early to tell if the new rules will be upheld in the lawsuit. Because of this, you should first decide whether you want to apply for a closed school discharge before enrolling in a new program at a new school.
Getting Transcripts and Records From Closed Schools
You may have trouble getting your academic records after a school has closed. 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 come up with a plan for students to access academic records in the future. Your school must give you information about where you can get those records.
Closed Schools and Veterans
If you used your GI Bill to attend a school that closed, you may be able to restore some of your GI Bill benefits. Visit the GI Bill restoration website for more information about applying for benefit restoration, or contact the VA’s Education Call Center at 1-888-442-4551.
