Midstate College

Disclosure of Benefits and Consequences of Closed School Discharges

Students,

Please see the information below regarding the benefits and consequences of closed school loan discharges. There is a link to the application at the bottom of this page.

If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan.

Learn about the eligibility requirements for discharge and how you can apply.

There are certain eligibility requirements to qualify for a closed school discharge; you must apply to get a discharge.

It’s important for you to obtain your academic and financial aid records if your school closes since you might need those records if you plan to attend another school or want your student loans discharged.

Discharge Criteria

You may be eligible for a 100 percent discharge of your William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans if you were unable to complete your program because your school closed, and if

  • you were enrolled when your school closed;
  • you were on an approved leave of absence when your school closed; or
  • your school closed within 120 days after you withdrew.

You are not eligible for discharge of your loans if your school closes and any of the following is true:

  • Except in exceptional circumstances, you withdrew more than 120 days before the school closed.
  • You are completing a comparable educational program at another school
  • through a teach-out,
  • by transferring academic credits or hours earned at the closed school to another school,
  • or by any other comparable means.
  • You completed all the coursework for the program before the school closed, even if you did not receive a diploma or certificate.

Discharge Process

Contact your loan servicer about the application process for getting your loan discharged.

  • Be sure to continue to make payments on your loan while your discharge application is being processed.
  • Find out what happens if your loan discharge is approved.
  • Find out what happens if your loan discharge is denied.

Automatic Closed School Discharge

If you meet the eligibility requirements for a closed school discharge of your loans obtained to attend a school that closed on or after Nov. 1, 2013, and you have not enrolled at another school that participates in the federal student aid programs within three years of the date your prior school closed, you will receive an automatic closed school discharge. This discharge will be initiated by the U.S. Department of Education (ED), and you will be notified by your loan servicer.

Although this closed school loan discharge is granted automatically after three years have passed since your school’s closure, nothing prevents you from applying for and receiving a closed school discharge as soon as your school’s official closure date is confirmed by ED. If you 1) attended a school that closed less than three years ago, 2) meet the eligibility requirements for a closed school discharge, and 3) want your loans discharged, contact your loan servicer about applying for a closed school discharge now instead of waiting for three years to receive an automatic closed school discharge.

Q&A on Closed School Loan Discharges

What benefits do I have by receiving a closed school loan discharge?

By receiving a closed school loan discharge,

  • you have no further obligation to repay the loan,
  • you will receive reimbursement of payments made voluntarily or through forced collection, and
  • the record of the loan and all repayment history associated with the loan, including any adverse history, will be deleted from your credit report.

I have nonfederal loans through private lenders. Can I get those loans discharged?

You will need to contact the private lender that made the loan to get that information.

I received loans for several different programs of study at the same school, but I was unable to complete any of the programs or transfer credits from one program to another before the school closed. Can all the loans be discharged?

Only loans you received for a program that you were unable to complete because of the school’s closure are eligible for discharge.

For example, if you initially enrolled in Program A, but decided not to continue with that program and transferred to Program B, and you were then unable to complete Program B because the school closed, only loans you received for Program B could potentially be discharged.

In the example, you would not be eligible for discharge of any loans you received for Program A, because the school’s closure did not prevent you from completing that program.

I did not complete the program, but I received a diploma or certificate. Does that make me ineligible for a loan discharge?

No. Before closing, some schools may issue a diploma or certificate to students who did not complete the program of study. If you did not complete your program of study, the fact that the school gave you a diploma or certificate does not disqualify you for discharge.

I transferred credits from a closed school to a completely different program of study at a new school and completed the new program. Does that make me ineligible for discharge of the loans I received at the closed school?

No. Transfer of credits from the closed school to a completely different program of study at the new school does not disqualify you for discharge.

I attended a school that is now closed. Where can I obtain a copy of my academic transcript?

Contact the state licensing agency in the state where the school was located to find out if the state has the records.

My school informed me that they have arranged a “teach-out” with neighboring schools. What is a teach-out?

A teach-out is a written agreement between schools that provides for the equitable treatment of students and a reasonable opportunity for students to complete their program of study if a school ceases to operate before all students have completed their program of study.

If my school closes and I then enroll in a comparable program at another school, can I still receive a discharge of the loans I received at the closed school?

It depends. If you completed or are in the process of completing a comparable program of study at another school through a teach-out, by transferring academic credits or hours from the closed school, or by any other comparable means, you are not eligible for a closed school discharge.

However, you may be eligible for discharge if you completed or are in the process of completing a comparable program at another school, but you did not participate in a teach-out, transfer credits or hours from the closed school, or benefit from the training you received at the closed school by any other comparable means, and if you otherwise meet the eligibility requirements for a closed school discharge.

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