Loan Forgiveness Possibilities When School Shuts Down

Student Loans Are Complicated.

See if you are eligible for Student Loan Forgiveness

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In an era where educational institutions’ financial stability can be unpredictable, understanding the complexities of loan forgiveness when a school unexpectedly shuts down becomes essential.

Students, parents, and guardians alike may face the challenge of managing loans for an abruptly interrupted education. Amid these uncertainties, awareness of federal and private loan forgiveness options and their respective qualification criteria can provide some financial relief.

However, applying for loan discharge and its potential aftermath are areas that require careful consideration.

Key Takeaways

  • Eligible loans for forgiveness include federal direct loans, FFEL loans, Perkins loans, Parent Plus loans, and Stafford loans.
  • Private student loans do not qualify for closed school discharge, but options such as settlement or bankruptcy exist.
  • Despite school closure, degrees remain valid but may face value and credit transfer challenges, necessitating borrower defense strategies.
  • Loan discharge application involves verifying school closure, submitting to loan servicer, and maintaining loan payments until approval.

Understanding Eligible Loans for Forgiveness

When considering loan forgiveness due to school closure, it is imperative to understand that only certain types of loans qualify for this benefit, including William D. Ford Federal Direct Loans, Federal Family Education Loans (FFEL Loans), Perkins Loan, Parent Plus Loans, and Stafford Loans.

These federally-funded loans offer a closed school discharge benefit, which permits students to apply for loan forgiveness if their institution closes while they are enrolled or shortly after they withdraw. It’s essential to know the specifics of your loan agreement, as some loans may require you to be attending school within 120 days of closure to qualify.

Also, note that loan discharge due to school closure is subject to final approval by the U.S. Department of Education.

Private Loans Forgiveness Options

While federally-funded loans provide options for discharge in the event of a school closure, it is essential to note that private student loans do not offer the same relief. Private student loan providers operate under different rules and are not obligated to offer forgiveness or discharge options.

Options for relief on private loans are limited and typically include settlement or bankruptcy, both of which carry significant financial consequences. The U.S. Department of Education sets stricter eligibility requirements for private loan forgiveness, with qualification for closed school loan discharge being particularly challenging.

It is essential for borrowers to understand these limitations and seek advice from a financial professional or their loan servicer before making any decisions. Remember, negotiation with your lender might also be a viable option.

Impact of School Closure on Your Degree

The closure of your educational institution can have significant implications for the validity and practical value of your degree. Regardless of the school’s closure, your degree remains valid. However, its practical value may diminish due to the absence of the institution’s ongoing reputation and credibility.

Moreover, if you were still pursuing your degree at the time of closure, transferring credits to another school can be challenging. Some institutions might not recognize credits from a closed school, forcing you to repeat courses.

Handling the impact of a closed school on your degree requires strategic planning, including researching transfer options and possibly applying for loan forgiveness.

Locating School Closure Date

Determining the exact date of your school’s closure is an essential step in applying for loan discharge due to school closure. This date is critical as it directly affects your eligibility for the discharge.

To find this information, the U.S. Department of Education’s Closed School Search Page is an invaluable resource. The tool provides a detailed listing of schools that have closed, along with their respective closure dates.

Should you have difficulty locating your institution on the list, the Department of Education or your loan servicer may be able to provide further assistance. Be prepared to provide necessary information such as the name of the institution, location, and the period you attended to help expedite the process.

Acquiring Loan Discharge Application

Once you have confirmed your school’s closure date, the next step in the process is to acquire the Loan Discharge Application: School Closure form. This form is important in starting the loan forgiveness process. It can be obtained from the U.S. Department of Education’s website or directly from your loan servicer.

The form requires specific details regarding your enrollment and the circumstances surrounding your school’s closure. It’s also important to gather supporting documentation, such as transcripts or financial records, which may strengthen your application. Remember, only eligible federal loans can be discharged. Private loans don’t offer this benefit.

If you face difficulties in acquiring or filling out the form, consider seeking assistance from a legal or financial advisor.

Process of Submitting Discharge Application

After acquiring the necessary Loan Discharge Application: School Closure form, you initiate the loan forgiveness process by submitting this document to your loan servicer.

It’s essential to fill out the form accurately, making sure all required details are provided. This includes personal information, school details, and an explanation of the circumstances surrounding the school’s closure. Make sure that you sign the form before submission.

You can submit the completed form via mail, fax, or email, as per your loan servicer’s instructions. Keep a copy of the submitted form for your records.

While waiting for the discharge approval, continue making payments on your loan to prevent default. The discharge application process necessitates patience and meticulousness to achieve favorable results.

Aftermath of Application Submission

Handling the aftermath of a closed discharge application submission requires careful consideration, particularly in regard to maintaining loan payments and monitoring the decision process. Until a decision is reached, it is essential to continue making monthly loan payments to avoid falling into delinquency or default.

The decision on your application can take an unspecified length of time, dependent on variables such as the loan servicer’s processing capabilities and the complexity of the case. It’s also important to periodically check the status of your application with your loan servicer.

During this waiting period, considering an income-driven repayment plan might be beneficial to manage the loan payments better. Always remember, patience and vigilance are key in handling this process successfully.

Avoiding Consequences of Loan Default

While waiting for the decision on your loan discharge application, it’s important to understand the potential consequences of loan default and take steps to prevent it. Defaulting on your student loan can result in severe credit damage, wage garnishment, loss of tax refunds, and even legal action.

To avoid these repercussions, consider implementing income-driven repayment plans, which adjust your monthly payments according to your income and family size, providing some relief. Additionally, deferment or forbearance options can temporarily pause or reduce payments, buying you time.

Frequently Asked Questions

What Happens if My School Closes While I’m on an Approved Leave of Absence?

If your school closes while you’re on an approved leave of absence, your federal loans may be eligible for discharge, depending on the circumstances. It’s important to verify your eligibility with the loan servicer promptly.

Are There Alternative Options for Loan Forgiveness if My School Didn’t Close, but Lost Its Accreditation?

Yes, there are alternative options for loan forgiveness if your school lost accreditation. You may apply for Borrower’s Defense to Repayment, arguing that the school’s loss of accreditation negatively impacted your education’s value.

If I’ve Already Consolidated My Federal Student Loans, Can I Still Apply for a Closed School Discharge?

Yes, you can apply for a closed school discharge even if you’ve already consolidated your federal student loans. The key requirement is that the school must have closed while you were enrolled or shortly after you withdrew.

How Does the Closure of My School Affect My Eligibility for Public Service Loan Forgiveness?

The closure of a school does not directly affect eligibility for Public Service Loan Forgiveness. However, it could impact your qualifying payments if it disrupts your employment in a qualifying public service job.

If I’m a Military Service Member, Does the Closure of My School Affect My Eligibility for the Military Service Loan Forgiveness Program?

As a military service member, your eligibility for the Military Service Loan Forgiveness Program is generally unaffected by your school’s closure. The key determinant is your military service, not the status of your school.


In summary, understanding student loan forgiveness during a school closure is crucial. This requires thoroughly comprehending eligible loans, the impact on the degree, and strategies to avoid loan default.

Knowing how to locate the closure date, acquire and submit the discharge application, and maneuver the aftermath is equally essential. By arming oneself with this knowledge, borrowers greatly enhance their chances of successfully maneuvering the loan forgiveness process.


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See Your Student Loan Forgiveness Eligibility

Join the over 50 Thousand people who have received help from!

Contact Information
Do You Owe Over $10,000 in Federal Student Loans?
What is The Current Loan Status of Your Loans?
Do you have Unsecured Debts Over $10,000?
Did You Attended a For-Profit College?
Are you Currently Enrolled in College or Going Through Active Bankruptcy?
Are You Employed Full-Time?
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