Can I Get Student Loan Forgiveness if my School Closed?

Looking to get your loans forgiven because your school closed?

You may be able to do that.

Here’s what I mean.

Yes, it’s possible to get federal student loan forgiveness if your school closed.

Pretty much, all your loans that are federal are eligible for closed school discharge no matter of your educational program of study. This includes: William D. Ford Federal Direct Loans, the Federal Family Education Loans (FFEL Loans), the Perkins Loan, Parent Plus Loans, Stafford Loans, and consolidation loans.

But few people will be able to do so.

Private loans don’t have a similar program to the federal government’s for closed school discharges. In my experience, you have only two options to get rid of your loan debt: settlement or bankruptcy.

Why?

The U.S. Department of Education’s eligibility requirements for a closed school loan discharge are strict.

You qualify if you did not complete your coursework at a comparable program of study at another school through a teach-out and:

• You were enrolled when the school closed or

• You were on an approved leave of absence when the school closed or

• Your school closed within 120 days after you withdrew

In other words, you’re eligible for a closed school discharge only if you couldn’t complete your education because the school closed.

So if you attended a school like Sanford Brown, ITT Tech, or Art Institute, and that school closed well after you left, then you’re not eligible for a closed school discharge.

The short answer is nothing.

Your degree remains valid if your school closes.

But, and here’s the big problem as you already know, is that your degree is, for the most part, worthless.

Your employer could care less that you have a masters degree from Kaplan University or a law degree from Charlotte School of Law.

You’re likely stuck paying for a degree you got almost no value from.

Transferring credits isn’t an option.

Your new school won’t transfer credits from The Art Institute or Vatterot.

The hard truth is this:

You’re likely stuck paying for a degree you got almost no value from.

Is there any hope?

Possibly.

If you don’t qualify for a closed school discharge, consider submitting a Borrower Defense to Repayment Application or filing bankruptcy to discharge your student loans as an undue hardship.

Okay, so you’re pretty sure you attended the school before it closed but you’re not 100% certain.

Here’s what to do:

Search the Department of Education’s Closed School Search Page.

Basically, this page is a spreadsheet that lists the closure dates for schools of higher education that participated in the federal student aid program.

Now that you know you meet the eligibility requirements, your next step is to submit a loan discharge application.

To do that, you’ll first need to download the Loan Discharge Application: School Closure form. (You can also ask your loan servicer to send it to you.)

Completing the form is pretty easy so I won’t go over it here.

But if you need help, call the federal student aid phone number at 800-433-3423.

You’ll use the same form whether you’re the student borrower or parent borrower.

Submit your completed Loan Discharge Application School Closure form to your loan servicer.

Use the National Student Loan Data System to find out who has your loan servicer is.

Related: How to Use the National Student Loan Data System to View Your Student Loans

Once submitted, you remain responsible for your monthly loan payments until your application is approved.

More on how long that takes in a sec.

So if you want to avoid paying on the loan while you wait on a decision, see if you qualify for a $0 payment under one of the income-driven repayment plans, ask for an administrative forbearance, or ask for a deferment.

There’s no time limit on how long it takes to get a decision on your application.

Be prepared to wait.

And be prepared to make sure your loans don’t go into default.

Because if that happens, you’re exposed to wage garnishment, getting your tax refund taken, or your Social Security benefits offset.