Overview

Closed-School Discharge is a federal protection that relieves borrowers of federal student loan repayment when their school shuts down and they were unable to complete their program because of the closure. It’s intended to prevent students from being stuck repaying loans for an education they could not finish (U.S. Department of Education — studentaid.gov).

Background and why it exists

Congress and the Department of Education established closed-school protections to help students who lose access to their education through no fault of their own. The policy has been updated over time to cover borrowers who were enrolled, on approved leave, or who withdrew shortly before a closure (studentaid.gov).

How it works — the basics

  • Covered loans: Most federal loans — Direct Loans, FFEL Program loans, and Federal Perkins Loans — may be eligible for Closed-School Discharge. Private student loans do not qualify.
  • Timing: You generally qualify if your school closed while you were enrolled, if you were on an approved leave of absence when the school closed, or if you withdrew within 120 days before the school’s closure. Exceptions can apply; always confirm with the Department of Education guidance.
  • Application: Borrowers must apply through their loan servicer. The servicer will review enrollment records and decide whether to discharge the loan(s).

Eligibility checklist

To evaluate whether you likely qualify, confirm all that apply:

  • You had federal student loans for attendance at the closed school.
  • You were enrolled at the school when it closed, were on an approved leave of absence, or withdrew within 120 days before the closure.
  • You did not complete the program because of the school’s closure (finishing the program before closure generally makes you ineligible).

Steps to apply (practical, step-by-step)

  1. Contact your loan servicer immediately; tell them the school closed and that you want to apply for Closed-School Discharge (studentaid.gov).
  2. Request the servicer’s Closed-School Discharge form or follow their online process. The servicer will ask for dates of enrollment and withdrawal.
  3. Submit documentation: enrollment records, withdrawal notices, communications from the school about closure, and any payment records you want refunded.
  4. Follow up in writing and keep copies. If the servicer needs records from the school, they must request them, but you should provide what you have.
  5. If approved, the servicer cancels the loan balance; if you made payments after the school closed, ask whether you’re eligible for a refund of those payments.

Documentation checklist

  • Enrollment and withdrawal dates (transcripts, student account records)
  • Notices or emails from the school about closure
  • Loan account statements and payment receipts
  • Any correspondence with the school or accreditor

In my practice, borrowers who keep clean records and submit them promptly get faster decisions from servicers.

Real-world examples

  • Student A was enrolled full time when a proprietary college closed; she applied, provided her enrollment records, and had her federal loans discharged.
  • Student B withdrew 45 days before the closure for unrelated reasons; because his withdrawal fell within 120 days of the closure, he qualified for discharge.

Common mistakes to avoid

  • Continuing payments without checking eligibility. Contact your servicer before assuming you must keep paying; you may be able to stop payments and request refunds.
  • Missing the 120-day withdrawal window or failing to document approved leaves of absence.
  • Confusing borrower defense claims with closed-school discharges. They can overlap but are separate processes.

Impact on credit and taxes

  • Credit reports: When a loan is discharged, the servicer should update the loan status with credit bureaus. That typically removes the outstanding balance; if you find incorrect reporting, dispute it with the bureaus and your servicer (Consumer Financial Protection Bureau — consumerfinance.gov).
  • Taxes: Under current federal law, most student loan discharges, including closed-school discharges, are excluded from gross income for federal tax purposes through tax year 2025 (American Rescue Plan Act). State tax treatment varies; check with a tax advisor or your state tax agency.

When Closed-School Discharge may not apply

  • You completed the program prior to the school’s closure.
  • You transferred credits and were able to complete a comparable program at another school.
  • Your loans were private student loans (those are not covered).

Related resources and internal links

  • For a step-by-step application guide, see Applying for Closed-School Student Loan Discharge: Step-by-Step (finhelp.io/glossary/applying-for-closed-school-student-loan-discharge-step-by-step/).
  • To compare closed-school discharge with borrower defense options, read Closed-School and Borrower-Defense Discharges: When They Apply (finhelp.io/glossary/closed-school-and-borrower-defense-discharges-when-they-apply/).
  • For documentation guidance, see Loan Forgiveness and Discharge: Documentation for Closed-School and Program Discharges (finhelp.io/glossary/loan-forgiveness-and-discharge-documentation-for-closed-school-and-program-discharges/).

What to do if your servicer denies your claim

  • Ask for the reason in writing.
  • Provide additional documentation or corrected enrollment/withdrawal dates.
  • If you believe the decision is wrong, file an administrative complaint with the Department of Education or seek help from the Consumer Financial Protection Bureau (consumerfinance.gov).

Authoritative sources

  • U.S. Department of Education — Closed School Discharge (studentaid.gov/borrowers/repayment/forgiveness/cancelation/closed-school-discharge)
  • Consumer Financial Protection Bureau — Student loan resources (consumerfinance.gov)

Professional disclaimer

This article is educational and does not constitute personalized legal, tax, or financial advice. For decisions about your situation, consult your loan servicer and a qualified student loan or tax professional.

Last reviewed: 2025 — information based on U.S. Department of Education guidance and consumer-protection resources.