Quick overview

A closed-school student loan discharge lets eligible borrowers cancel federal student loans when their school shuts down and they cannot complete their program. The Department of Education (Federal Student Aid) administers the process; you must apply — discharges are not automatic. This article gives a step-by-step application plan, a documentation checklist, realistic timelines, common pitfalls, and actions to take after a decision. For official rules and the online application, see the U.S. Department of Education’s Closed School Discharge page (Federal Student Aid).

Who qualifies (plain language)

You may be eligible for a closed-school discharge if one of these applies:

  • You were enrolled at the school on the date it closed.
  • You withdrew from the school within the timeframe the Department of Education recognizes for a discharge (normally within 120 days before the school closed, though special circumstances can affect that window).
  • You were enrolled in a school-sponsored course but couldn’t complete it because the school closed.

You are typically not eligible if you completed your program or if you transferred to and completed the same program at another eligible institution. The rules apply to federal student loans only; private loans are subject to the lender’s policies (see our guide on Discharging Private Student Loans for differences: https://finhelp.io/glossary/discharging-private-student-loans-options-and-legal-challenges/).

Source: Federal Student Aid (U.S. Department of Education) — closed-school discharge information and FAQs (studentaid.gov/closed-school, FAQ page).

Step-by-step application process (detailed)

  1. Confirm eligibility
  • Check the Department of Education’s closed-school list or the school’s closure notice.
  • Note the school’s official closure date and your enrollment/withdrawal dates.
  1. Gather required documentation (what to collect)
  • Loan account numbers and the name(s) of your federal loan servicer(s).
  • Enrollment records: transcript or enrollment verification showing start/stop dates.
  • Withdrawal paperwork, if you withdrew (withdrawal date and any correspondence).
  • Tuition payment receipts or billing statements (useful if you paid loans after the school’s closure and expect a refund).
  • Any written notice from the school about its closure, accreditation letters, or news releases.

In my practice I’ve seen the difference documentation makes: a clear transcript and an official closure notice can shorten follow-up requests from the servicer.

  1. Submit the application
  • Apply online at Federal Student Aid’s website or contact your loan servicer to request the closed-school discharge process. There is an online form and instructions at Federal Student Aid — Closed School Discharge.
  • If you prefer mail, ask your servicer for the required form and mailing address.
  1. Respond promptly to follow-up requests
  • The servicer or Federal Student Aid may ask for additional documents or clarifications; respond quickly.
  • Keep records of every communication (dates, names, and copies of documents).
  1. Wait for a determination and next steps
  • Determination timelines vary; the agency notes the review can take several months. In practice, expect anywhere from 3 to 12 months depending on complexity and if additional information is needed.
  • If approved, your loans will be discharged and any payments made after the school closed may be refunded (the DOE handles the refunds for federal loans). If denied, you will receive an explanation and information about next steps.

Source: Federal Student Aid — Closed School Discharge FAQ (studentaid.gov/manage-loans/forgiveness-cancellation/closed-school/faq).

Practical timeline and example

  • Week 0–2: Collect documents and confirm eligibility.
  • Week 2–4: Submit the online application or mailed form.
  • Month 1–3: Servicer reviews; may request additional documents.
  • Month 3–12: Final determination issued; if approved, discharge posted and refunds processed.

Example: A client I worked with gathered enrollment records and the school’s closure notice and submitted an online application. The servicer requested a specific transcript entry; after we produced it, the discharge decision arrived at month 4 and the client received refunds for payments made after the closure.

What happens if you’re approved

  • Your qualifying federal loans are canceled (the account balance is set to $0).
  • Payments made after the school closed are generally refunded. Confirm the refund timing with your servicer.
  • Ask your servicer to update credit reporting to reflect the discharge; if the bureaus don’t update, you may need to file disputes.

What happens if you’re denied (and your options)

  • Read the denial letter carefully; it should state the reason.
  • If you believe the decision is incorrect, gather more documentation and request a review or appeal through the servicer or Federal Student Aid.
  • Consider related remedies: borrower-defense to repayment (if the school defrauded students) or other administrative remedies depending on your facts.

Special issues and common mistakes

Interaction with credit, taxes, and refunds

  • Credit: A discharge removes the loan balance, which usually improves your debt-to-credit ratio. If the servicer doesn’t update the credit bureaus, ask for proof of discharge and file disputes with the bureaus.
  • Taxes: Historically, some loan discharges could be taxable. Federal law changed in recent years around tax treatment of certain student loan relief. Tax rules can change, so check current IRS guidance or consult a tax advisor to confirm whether a closed-school discharge is taxable for your tax year.
  • Refunds: If your federal loan servicer collected payments after the school closed, you are often eligible for a refund — the servicer or Federal Student Aid will process it after discharge.

When private loans are involved

Closed-school discharge applies to federal loans only. Private lenders may consider hardship policies or settlement but are not required to discharge debts for school closures. For private loan strategies and legal considerations, read our related article: Discharging Private Student Loans: Options and Legal Challenges (https://finhelp.io/glossary/discharging-private-student-loans-options-and-legal-challenges/).

Checklist (print or save)

  • [ ] Confirm school closure date and your enrollment/withdrawal dates.
  • [ ] Request official enrollment verification / transcripts.
  • [ ] Save any school notices, emails, or news items about the closure.
  • [ ] Locate loan account numbers and servicer contact info.
  • [ ] Submit the closed-school discharge application online or via your servicer.
  • [ ] Respond promptly to document requests.
  • [ ] Keep copies of every correspondence and decision letter.

Professional tips from my practice

  • Start collecting documents immediately — closure notices and transcripts are often the decisive evidence.
  • Keep a single folder (digital or paper) for all communications and records; when you call your servicer, note the date, name, and summary of the call.
  • Ask the servicer to confirm in writing when a discharge is posted and when refunds will be issued; you’ll need that for credit disputes or tax records.

Useful links and further reading

Professional disclaimer: This article is educational and based on current federal guidance as of 2025. It is not legal or tax advice. For case-specific help, consult a qualified student-loan attorney, financial advisor, or tax professional. Federal rules and tax laws change; always verify details at Federal Student Aid (https://studentaid.gov) or with an expert before acting.

If you want, I can turn this checklist into a printable PDF or draft an email template to send to your loan servicer when you apply.