Federal Loan Closed School Discharge
Borrowers with federal Direct Loans or FFEL Program loans may be eligible for a Closed School Discharge if their school closed while they were enrolled or within 180 days of their withdrawal. A successful discharge cancels the federal loan balance for that enrollment period and results in a refund of any amounts already paid.
To apply, borrowers contact their loan servicer and submit a Closed School Discharge application. The Department of Education verifies school closure and enrollment dates. The process does not require hiring an attorney.
ℹ Automatic Discharge
The Transfer Alternative
Borrowers who are able to transfer their credits to another eligible institution and complete their program elsewhere are generally not eligible for Closed School Discharge, the assumption being that the educational goal can still be achieved.
Whether to transfer or seek discharge depends on individual circumstances: the quality of credit transfer options available, the time remaining in the program, and the financial implications of each path.
Private Student Loans and School Closure
Private student loans are not covered by the federal Closed School Discharge program. Private lenders are not required to cancel balances in the event of a school closure.
Some private lenders have voluntary policies that provide relief in certain closure situations. Borrowers with private loans at a closed school should contact their lender directly and ask specifically about school closure policies.
LoanAmerica evaluates partner schools before approving loans for their students, using outcome-based criteria designed to minimize the likelihood of enrolling students at institutions at high risk of closure. The School Participation Agreement with each partner school includes provisions addressing closure scenarios.
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Get Notified at Launch →Frequently Asked Questions
Are federal student loans cancelled if my school closes?
Potentially. Borrowers who were enrolled at a school when it closed, or who withdrew within 180 days of the closure, may be eligible for a Closed School Discharge that cancels their federal student loan debt for that enrollment period.
What is the Closed School Discharge for federal loans?
The Closed School Discharge is a federal program that cancels Direct Loans and FFEL Program loans for students who were unable to complete their program because their school closed. Eligibility requirements include being enrolled at the time of closure or having withdrawn within 180 days prior.
What happens to private student loans if a school closes?
Private student loans are not eligible for the federal Closed School Discharge. Private lenders handle school closure situations according to their own policies. Some lenders have voluntary relief programs; others do not. Borrowers should contact their private lender directly.
LoanAmerica is not a lender and does not make credit decisions. All loans will be underwritten, approved, and funded by a participating lending partner bank. Loan products are not yet available. Information on this site is for general informational purposes only and does not constitute an offer to lend, a solicitation, or a commitment to provide financing. When available, loans will be subject to credit approval, school eligibility, enrollment verification, and program qualification. The 72-hour funding window is a target timeline, is not guaranteed, and may vary. This content does not constitute legal, financial, or tax advice. For information about existing federal student loans, contact your servicer or visit studentaid.gov.