Can you get federal student loans discharged if your school closed?

Who qualifies for a closed school discharge?

Federal Student Aid says you may be eligible if you were unable to complete your program of study because the school closed, and one of these is true.1

• You were enrolled when the school closed.1
• You were on an approved leave of absence when the school closed.1
• The school closed within 180 days after you withdrew.1

You are not eligible if you completed your program at the closed school, or if you are completing or have completed it at another branch or location of the school or through an approved teach-out agreement at another school. A borrower who withdrew more than 180 days before the closure is not eligible unless there is an exceptional circumstance.1

What about a teach-out, transferred credits or a lesser diploma?

These situations cause a lot of confusion after a closure, and Federal Student Aid answers each one directly.

Because a teach-out can end your eligibility, it is worth asking your loan servicer how the rule applies to your dates before you enroll in one.

What does the discharge do?

Federal Student Aid describes it as a full discharge of the loans you received to attend that school. Once it is granted, you have no further obligation to repay those loans.1

You also get back what you already paid, whether you paid voluntarily or through forced collection such as garnishment. The record of the loan and its repayment history, including any late payments or default, is deleted from your credit report.1 2

Under the Direct Loan regulation, the discharge also ends the obligation of any endorser on the loan, along with accrued charges and collection costs.2

How do you apply for a closed school discharge?

The process runs through your loan holder and servicer, and eligibility turns on dates. Have yours ready: when you enrolled, when you last attended or withdrew, and when the school closed.

1. Get your academic and financial aid records. Federal Student Aid says you may need them to attend another school or to have your loans discharged.1
2. Check that the closure is on record. The Department's Weekly Closed School Search File is the official list, posted every Sunday, but closures are not always reported right away.3
3. Apply. The loan holder automatically sends an application to borrowers who meet the requirements, or you can contact your loan servicer about applying.1
4. Keep making payments while the application is processed.1

None of this requires paying a company. Federal Student Aid says borrowers never have to pay for help with federal student loans.4 5

Is the discharge automatic, and which rules apply?

It depends on when the school closed. If it closed on or after July 1, 2023 and you meet the requirements, you will generally receive an automatic discharge one year after the official closure date, and you can apply sooner. If it closed before July 1, 2023, the discharge is not automatic, but you can still apply with a paper application to your servicer, whatever the closure date.1

The rules themselves are in flux. On Aug. 7, 2023 a federal court delayed the latest closed school and borrower defense regulations. As of October 22, 2026, Federal Student Aid says it processes applications under earlier rules and will not process any under the 2023 rule unless its effective date is reinstated.1

Because the details depend on that court case, confirm the current requirements on StudentAid.gov or with your servicer before you count on a particular date or condition.

What if you do not qualify, or your loans are private?

Other federal routes may fit. A school closing does not by itself qualify a borrower for borrower defense to repayment, but that discharge may apply if the school engaged in certain misconduct related to the loan or the education it provided. A separate false certification discharge covers a school that signed you up for loans without your permission or enrolled you when you did not meet eligibility requirements.6

A closed school discharge covers federal loans only. For private student loans, Federal Student Aid says to contact the private lender that made the loan to discuss your options.1

How does a closed school discharge relate to bankruptcy?

Borrowers often worry that this program will be used against them in bankruptcy. The Justice Department's guidance for student loan bankruptcy cases says the availability of this administrative relief should have limited influence on the bankruptcy analysis, because borrowers may not receive a closed school discharge for reasons that have nothing to do with their finances.7

A closure can also matter to the bankruptcy analysis itself. Under the guidance, an inability to repay is presumed to continue when the borrower did not obtain the degree the loan paid for, or when the loan has been in a payment status other than in-school for at least ten years.7

A bankruptcy discharge of a student loan still requires a separate lawsuit inside the bankruptcy case and proof of undue hardship, and the bankruptcy judge makes the final decision.8