Last month the Department of Education was ordered to begin granting closed school discharges for borrowers affected by the closure of their institution. The Department reported that they’ve identified more than 15,000 borrowers who are eligible to have their loans automatically discharged and they’ve begun emailing notifications to borrowers. Most discharges will be completed within 90 days.

Since the 2016 borrower defense to repayment regulations are now in effect, there are new conditions for schools when they close. According to a recent electronic announcement schools must provide all enrolled students with a closed school discharge application and a written disclosure, describing the benefits and consequences of a closed school discharge as an alternative to completing their educational program through a teach-out agreement, immediately upon submitting a teach-out plan after the occurrence of any of the following events:

  • The Department initiates a limitation, suspension, or termination of the participation of a school in any Title IV, HEA program under 34 CFR 600.41 or subpart G of 34 CFR Part 668 or initiates an emergency action under 34 CFR 668.83;
  • The school’s accrediting agency acts to withdraw, terminate, or suspend the accreditation or preaccreditation of the school;
  • The school’s State licensing or authorizing agency revokes the school’s license or legal authorization to provide an educational program;
  • The school intends to close a location that provides 100 percent of at least one program; or
  • The school otherwise intends to cease operations.