Quick overview
Closed school discharge is a federal protection that cancels eligible federal student loan debt when a school closes or stops offering a borrower’s program. It is not available for most private student loans. The U.S. Department of Education administers the process and provides forms and servicer instructions (U.S. Department of Education / Federal Student Aid).
In my work advising borrowers, I’ve seen closed school discharge erase balances and allow people to restart education without an outstanding federal debt tied to the closed institution. However, eligibility has technical limits and application steps that are easy to miss—this guide explains the rules, documents you need, how partial vs. total discharge can occur, and next steps.
(Authoritative sources: U.S. Department of Education: Closed School Discharge, Federal Student Aid – studentaid.gov; Consumer Financial Protection Bureau guidance.)
Who qualifies: eligibility checklist
- You were enrolled at the school when it closed. That includes students in an on-campus program or in an eligible distance-learning program that the school suddenly stopped offering.
- You withdrew from the school no more than 120 days before the school closed. The 120‑day rule is the standard cutoff the Department of Education uses for most claims.
- You were unable to complete your program because the school closed. If you completed the program or finished all requirements, you generally do not qualify for a closed school discharge.
- You hold federal student loans (Direct Loans, FFEL, Perkins in many cases). Private student loans are generally not covered.
- You did not transfer to another school that offered a substantially similar program before the closure; if you transferred and the program continued elsewhere, discharge eligibility may be affected.
Note: Special-case rules apply if a school stops offering only part of a program or if state law or accreditor actions create different timelines. Always verify closure dates and program specifics with the Department of Education (studentaid.gov).
Total versus partial discharge — how they differ
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Total (full) closed school discharge: Most commonly, the Department cancels the full federal loan balance for eligible borrowers tied to the closed program or enrollment period.
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Partial discharge: Occurs when only a portion of a student’s federal loans are eligible. Examples include:
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You consolidated loans after a closure and only some underlying loans are eligible for discharge.
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You completed part of a program and only the portion tied to the closed school is dischargeable.
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A lender or servicer determines only certain loan records match the school/program closure.
Partial discharges are less common but do happen. If you receive a partial discharge notice, review the servicer statement to see which loan amounts or periods were discharged and which remain.
How to apply (step‑by‑step)
- Confirm your eligibility and the school’s official closure date. Use the Department of Education site or your loan servicer for verification (Federal Student Aid: Closed School Discharge).
- Contact your loan servicer. Most closed school discharge requests start with the loan servicer assigned to your federal loans. The servicer will give the correct application or paperwork.
- Complete the Department of Education or servicer form. The servicer may ask for proof of enrollment, withdrawal dates, and school closure notice. Keep copies of all records.
- Submit documentation as instructed and follow up. Document dates, names, and confirmation numbers every time you speak to a servicer or submit a form.
- Wait for a decision and next steps. Processing can take several weeks to months. If approved, the servicer will apply the discharge and notify you. If denied, the servicer will explain the reasons and any appeal rights.
If you’re unsure which servicer manages your loans, log in to your Federal Student Aid account at studentaid.gov to see loan details.
Documents and evidence to gather
- Enrollment records (registration, class schedules, transcripts) showing you were enrolled at the time of closure.
- Withdrawal paperwork (if you withdrew), ideally with dates.
- Any official school notices announcing a closure or program suspension.
- Communications (emails or letters) from the school indicating program cancellation.
- Loan statements showing the specific loans tied to the school.
In my practice I advise clients to assemble a single PDF package containing the above items and to send it via the servicer’s secure portal. Keep scanned originals and a dated log of submissions.
Timing and what to expect
- Processing time: A straightforward case can be resolved in a few weeks; complex cases or those requiring investigation may take several months.
- Credit reporting: If your loans are discharged, the servicer should update credit reporting to reflect the discharge. Confirm with both your servicer and credit bureaus if reporting doesn’t change within 30–60 days.
- Interest and refunds: If you recently made payments toward a loan that’s discharged, you may get a refund. The servicer will explain adjustments.
Interaction with other debt relief paths
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Borrower Defense to Repayment: If your school engaged in misconduct (fraud, misrepresentation), borrower defense may be a stronger or alternative claim. Borrower Defense can lead to loan discharges beyond the limited closed‑school rules (see our guide to Borrower Defense to Repayment).
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Consolidation: Consolidating after closure may disqualify certain loans from being discharged in a closed school claim. If you’re considering consolidation while pursuing a discharge, talk to your servicer or an advisor first.
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Defaulted loans: If your loans are already in default, you may still be eligible for a closed school discharge, but the process differs and may require additional steps to get the default reversed.
Internal resources: learn more about how discharge differs from forgiveness at FinHelp’s “Student Loan Forgiveness vs. Discharge” and get specifics on borrower claims in our “Borrower Defense to Repayment” article.
- Closed School Discharge (FinHelp glossary): https://finhelp.io/glossary/closed-school-discharge/
- Borrower Defense to Repayment (FinHelp glossary): https://finhelp.io/glossary/borrower-defense-to-repayment/
- Student Loan Forgiveness vs. Discharge (FinHelp glossary): https://finhelp.io/glossary/student-loan-forgiveness-vs-discharge/
Tax consequences (what to know in 2025)
Under the American Rescue Plan Act of 2021, many types of student loan discharges are excluded from taxable income for tax years 2021 through 2025. That means most closed school discharges completed during that window are not treated as taxable income on your federal tax return. However, tax law can change—after 2025 the exclusion may not apply. Always confirm current IRS guidance or consult a tax advisor for your situation (IRS guidance on discharge and cancellation of debt).
Common mistakes and how to avoid them
- Waiting to contact your servicer. Contact them as soon as you learn the school is closing.
- Consolidating before resolving a discharge claim. Consolidation can convert eligible loans into ineligible ones for discharge; get advice first.
- Failing to keep records. Missing enrollment or withdrawal records can slow or deny a claim.
- Assuming private loans qualify. Most private loans are not covered—contact your private lender for options.
Real-world examples (anonymized)
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Client A: Enrolled in a vocational program that closed mid‑semester. She applied with course registration and the school’s closure notice. Her $18,400 Direct Loan balance was discharged within 10 weeks, and she used the refund to enroll elsewhere.
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Client B: Withdrew 90 days before the closure and later consolidated loans. Because consolidation occurred before the discharge claim, only some of his loans qualified; he received a partial discharge. The experience underscores why timing and loan actions matter.
Next steps if you think you qualify
- Log in to studentaid.gov and identify your federal loan servicer and loan types.
- Gather enrollment and withdrawal records and any school notices. 3. Call your servicer and request the closed school discharge application or submit a request through the Federal Student Aid portal.
- Consider speaking with a qualified student loan counselor or financial advisor—especially if you consolidated loans or have complex loan histories.
Bottom line
Closed school discharge can eliminate significant federal student loan burdens for borrowers left stranded by a school closure. The rules favor borrowers who were enrolled at closure or who withdrew shortly before it, but actions like consolidation and program transfers can complicate eligibility. Document everything, contact your servicer promptly, and consult tax and loan advisors if your case is complex.
Professional disclaimer: This article is educational and does not replace personalized legal, tax, or financial advice. For official guidance, consult the U.S. Department of Education’s Federal Student Aid pages (studentaid.gov) and the IRS, and consider a licensed advisor for your situation.
