School Closure Discharge
What Is School Closure Discharge?
School Closure Discharge is a federal student loan discharge program that cancels eligible federal student loans if a borrower’s school closes while the borrower is enrolled or shortly after withdrawal.
It applies to qualifying federal Direct Loans and certain other federal loans.
Borrowers must meet specific enrollment and timing criteria.
Why It Matters
School Closure Discharge:
- Cancels eligible loan balances
- Protects borrowers from institutional disruption
- Requires documentation of enrollment status
If approved, the borrower’s obligation to repay the affected loans is eliminated under federal rules.
How School Closure Discharge Works
School Closure Discharge requires borrowers to demonstrate that their school closed during enrollment or within a qualifying period after withdrawal.
Example: If a borrower was enrolled when the institution shut down and did not complete the program elsewhere, they may qualify for discharge of the associated federal loans.
Once approved, the remaining balance on eligible loans is canceled.
Transferring credits to another school may affect eligibility.
School Closure Discharge vs. Borrower Defense
School Closure Discharge → Based on institutional closure
Borrower Defense → Based on misrepresentation or misconduct
The triggering circumstances differ.
FAQs About School Closure Discharge
Do private loans qualify?
Federal discharge programs apply only to eligible federal loans.
Is discharge automatic?
Borrowers must apply and meet eligibility requirements.
Does transferring schools affect eligibility?
Completing the program at another institution may impact qualification.
Related Terms
