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School Closure Student Loan Discharge

Simply said, some loans can be 100% discharged when a school is closed prior to the student’s completion of the educational program. A student that qualifies for loan discharge will no longer be required to make payments and may be entitled to receive a refund.

Other possible benefits of loan discharge are:

  • Eliminates wage garnishment and tax offsets
  • Deletion of negative credit reporting relating to default
  • Removal of the loan from default status

This page focuses on school-closure discharge for federal student loans. For private student loans, discharge policies vary so it’s best to check to with the original lender.

Who qualifies for a loan discharge due to school closure?

The following federal loans may be eligible for discharge when certain circumstances are met:

  • Direct Loans
  • FFEL Loans
  • Federal Perkins Loans

You can seek to discharge these loans under the following circumstances:

  1. The school closed while you were enrolled which causes you to not complete the program. For these purposes, a person on an authorized leave of absence is considered an enrolled student.
  2. You withdraw from the program and the school closes within 120 days.

If any of the following apply, your loans will not be eligible for discharge:

  1. You completed the required classes for the program, regardless of whether you received a certificate of completion.
  2. You are enrolled at a comparable program at another educational institution.
  3. The school closes more than 120 days after withdrawal.

If you transfer your credits to another school for an entirely different program, then your loans for the closed-school might still be dischargeable. Similarly, if the school issued a certificate of completion prematurely (without the student fully completing the actual program) prior to closing, then the loans might still be dischargeable.

What happens if my discharge application is denied?

Upon being denied, the borrower will be held responsible for paying the loan. Denials for “school closure” discharge cannot be appealed. In this situation it would be prudent to explore repayment plans, such as the IBR Payment Plan. Furthermore, you can conduct research to determine whether a tuition recovery fund or performance bond exists to cover the damages.

Get Help With Your School-Closure Loan Discharge Application

At the Law Office of Simon Goldenberg, PLLC, our attorneys help people resolve a variety of issues that arise with student loans. We provide assistance with respect to completing and submitting student loan discharge applications. As the process can easily become overwhelming, our legal staff makes it easier for student borrowers to pursue remedies with their lenders and the Department of Education. With the help of our seasoned New York student loan lawyers, you can rest assured that we will leave no stone unturned in pursuing a resolution.

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