Quick overview

Closed School Discharge and Borrower Defense to Repayment both can eliminate federal student loan debt, but they address different problems. Closed School Discharge is a time‑and‑event based remedy: the school must have closed while you were enrolled (or within a limited window after you withdrew). Borrower Defense is fact‑based: you must show the school’s actions — such as fraud, false promises about outcomes, or violations of state law — caused your financial injury.

(Author’s note: In my practice helping clients since 2010, I’ve seen claim outcomes hinge on small details — dates, marketing materials, and documented communications. Gather everything and act quickly.)

Eligibility: who qualifies for each?

  • Closed School Discharge

  • You must have federal student loans (Direct, FFEL, or Perkins) and your school must have closed while you were enrolled or within 120 days after you withdrew. There are limited exceptions that extend the 120‑day rule if you couldn’t reasonably have known the school closed or if the Department of Education (ED) determines otherwise. (Source: U.S. Dept. of Education — Closed School Discharge page.)

  • Borrower Defense to Repayment

  • Applies when a school engaged in misconduct (fraud, misrepresentation, or breach of contract) that relates to your loan or educational program. Borrower Defense claims apply to Direct Loans; borrowers with FFEL or Perkins loans generally must first consolidate into a Direct Loan to be eligible. You must show a connection between the school’s conduct and your decision to take out the loan. (Source: U.S. Dept. of Education — Borrower Defense.)

Loans covered and consolidation rules

  • Closed School Discharge: Covers Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Perkins Loans. Perkins loan discharges may require separate steps handled by the school’s servicer or the ED. (studentaid.gov/repay-loans/forgiveness-cancellation/closed-school)

  • Borrower Defense: Direct Loans are directly eligible. FFEL and Perkins borrowers who want Borrower Defense relief normally must consolidate those loans into a Direct Consolidation Loan and then submit a Borrower Defense application (consolidation can affect eligibility or timing). Always confirm current ED instructions before consolidating. (studentaid.gov/borrower-defense)

Evidence & documentation: what you’ll need

  • Closed School Discharge

  • Proof of enrollment dates (transcripts, enrollment records, or statements from the school).

  • Documentation showing the school’s official closure date (public announcements, state licensing actions, or ED notices).

  • Loan account details (loan type, servicer, and account numbers).

  • Borrower Defense to Repayment

  • Records that show the school’s misrepresentations or breaches: promotional materials, emails, enrollment agreements, program catalogs, job placement claims, advertising screenshots, state attorney general complaints, and witness statements.

  • Evidence tying the misrepresentation to your decision to enroll or borrow money (e.g., an ad highlighting job placement you relied on).

Tip: Keep copies of all communications with the school and your servicer. In my experience, a single dated brochure or an email from admissions can make or break a claim.

How to apply and where to file

Internal resources: For step‑by‑step guidance on closed‑school applications and practical filing tips, see FinHelp’s guides: “How Closed School Discharges Work for Federal Student Loans” and “Applying for Closed‑School Student Loan Discharge: Step‑by‑Step.”

(Also see a broader overview of repayment and forgiveness options here: https://finhelp.io/glossary/student-loan-repayment-options-and-forgiveness-programs/.)

Typical timelines and expected delays

  • Closed School Discharge: When documentation is complete, servicers often process discharges in several weeks to a few months. However, verification or appeals can extend the timeline.

  • Borrower Defense: Historically, borrower defense claims have faced long backlogs. The Department of Education has reformed processes since 2021, but claims may still take many months or years depending on complexity and the need for ED investigation. Expect long lead times and plan accordingly.

Always keep payments current if you can or request a hardship deferment/forbearance while your claim is pending to avoid default (ask your servicer for options).

Credit reporting and tax consequences

  • Credit reporting: A loan discharge should update your account status with credit bureaus to show the debt as discharged — but late payments, defaults, or collection records that occurred before the discharge may remain on your credit report for a limited time. Check your reports and dispute any incorrect entries after discharge.

  • Taxes: Under the American Rescue Plan Act of 2021, student loan discharges (including closed school and borrower defense discharges) are excluded from taxable income through at least tax year 2025. Confirm current tax law or seek tax advice for discharges after 2025. (See IRS guidance and ED announcements.)

When both paths seem possible: overlap and strategy

It’s possible to meet the technical criteria for both Closed School Discharge and Borrower Defense (for example, a school closed after years of deceptive recruitment). Typically:

  • If the school closed during your enrollment and you meet the 120‑day rule, Closed School Discharge is often the faster, clearer path.
  • Borrower Defense can offer relief if you were defrauded even if the school remained open, or if the timeframe around closure creates ambiguity.

Do not consolidate loans into a Direct Consolidation Loan without confirming how consolidation affects your eligibility. Consolidation can make FFEL/Perkins borrowers eligible for Borrower Defense, but it can also lock in repayment history or eliminate other discharge options. Consult a student‑loan specialist if unsure.

Real-world examples (anonymized)

  • Client A: Attended a vocational college that abruptly closed while they were enrolled. We submitted a Closed School Discharge with evidence of enrollment and the ED closure notice; the servicer approved the discharge within 3 months.

  • Client B: Graduated from a for‑profit program that had misrepresented job placement rates. The Borrower Defense claim required collecting marketing materials, alumni statements, and state attorney general filings. After an ED review, their Direct Loans were fully discharged — but the process took more than a year.

These examples show why matching the remedy to the facts matters.

Documentation checklist (practical)

  • Enrollment records, transcripts, and withdrawal date
  • Correspondence with the school (emails, letters, text messages)
  • Advertising and promotional materials (screenshots with dates)
  • Enrollment agreements and tuition/fee schedules
  • State licensing or agency notices about the school (if applicable)
  • Loan account numbers and servicer contact details
  • Any complaints filed with state agencies or the CFPB

Common mistakes to avoid

  • Waiting too long to file or to collect evidence
  • Consolidating loans without checking how it affects eligibility
  • Filing incomplete or unspecific Borrower Defense narratives — specificity matters (dates, quotes, names)
  • Assuming a discharge wipes clean all credit history — review your reports and dispute errors

Frequently asked questions

Q: Can I apply for both programs?
A: Yes. If the facts support both claims, you may submit both. However, the Department will evaluate each claim based on its own criteria and may offset relief for overlapping remedies.

Q: Will consolidating my loans hurt my chances?
A: Consolidation can be necessary for Borrower Defense eligibility if you have FFEL or Perkins loans, but it has tradeoffs. Consolidation may cause you to lose certain borrower benefits or reset repayment timelines. Consult an expert before consolidating.

Q: How do I appeal a denial?
A: For Borrower Defense denials, review ED’s decision letter to understand the grounds and consider submitting supplemental evidence or requesting reconsideration. For closed school denials, ensure the closure date and your enrollment dates are properly documented and appeal via servicer channels.

Authoritative sources and further reading

Professional disclaimer

This article is educational and does not constitute legal, tax, or financial advice. Individual cases vary; consult a qualified student loan counselor, attorney, or tax professional for personalized guidance. My observations are based on professional experience and public ED guidance current as of 2025.

If you want, I can create a one‑page printable checklist you can use when preparing either type of claim, or review an anonymized list of your documents and suggest how to strengthen a Borrower Defense narrative.