The pandemic has created worldwide economic challenges, and colleges and universities are feeling the strain. While only a few schools have permanently shuttered, experts say there could be more in the future. If this happens while you’re enrolled, you may have two options: transfer credits, or apply for discharge. Here’s what to know about each option.
Transfer your credits
If your non-profit school is closing for good, you should receive some advanced warning. (Unfortunately, this wasn’t the case for ITT Tech students in 2016.) The alert may offer some time to transfer your credit or make another move.
The Department of Education keeps a list of closed schools here. They also provide instructions for how to transfer, get access to your transcripts, apply for a loan discharge (more on that below), and more.
Apply for federal student loan discharge
If your school closes, it may be possible to discharge your federal student loans. The Department of Education says you may be eligible to discharge Direct Loans, FFEL Program Loans, or Federal Perkins Loans.
You may qualify if you couldn’t complete the program because the school closed. Other reasons you may be eligible: you were on an approved leave of absence, or the school closed within 120 days after you withdrew.
To start the process, contact your loan servicer. They can provide more details about the discharge application process and what to expect.
If you qualify for loan discharge
If you qualify for a discharge, your loan balance goes away—but until then, you must keep making payments. In some cases, you may also qualify for a refund. Your servicer may also remove delinquency or default from your credit reports.
If you don’t qualify for loan discharge
If you don’t qualify for discharge, you will have to keep paying the loans according to the terms of your promissory note. You may discuss other repayment options to ease the burden, though.
If the loans are in default, there are a couple of ways to fix it: apply for loan consolidation, or loan rehabilitation. You can see the pros and cons of each option here.
Explore borrower defense to repayment
You won’t qualify for discharge if you graduated before your school closed, but you may be eligible for borrower defense to repayment. This may also be an option if your school closed before you could complete your degree.
Unfortunately, it has become more difficult to qualify for borrower defense to repayment. As NerdWallet reports, no forgiveness is automatic. You must prove the school misled you or engaged in misconduct that broke the law—and prove specific financial harm. The loans themselves don’t count as harm; being unemployable might, though. Also, your window for possible relief is only three years, so don’t wait to apply.
You may submit a claim through the Department of Education’s website or by filling out a PDF and sending it via email or regular mail. You can see the complete instructions to submit a claim here.