On Aug. 7, 2023, a federal court delayed the effective date of the latest regulations governing borrower defense and closed school loan discharges. Borrowers may still apply for a closed school discharge. As of March 1, 2024 we will begin to process applications received on or after July 1, 2023, using earlier rules.

Note: Borrowers approved for discharge only under the new regulations will receive a forbearance that will end 60 days after the litigation is resolved. See Closed School Discharge | Federal Student Aid for updates.

Closed School Discharge

In certain instances, the closure of your school may result in a discharge, or release of your obligation to repay your student loan. Here's what you need to know.

You are eligible for a discharge if:

  • Your school closes while you are enrolled and you're unable to complete your program as a result. Note that if you were on an approved leave of absence at the time of the closure, you are considered to have been enrolled.

  • Your school closes within 180 days after you withdraw.

You are not eligible for a discharge if:

  • You withdraw more than 180 days before the school closes.

  • You are completing a comparable educational program at another school (through a teach-out agreement, a transfer or any other comparable means).

  • You have completed all the coursework for the program, even if you have not received a degree, diploma or certificate.

How to apply for a Closed School Discharge

If the school you attended recently closed and you believe you may be eligible for a closed school discharge, please contact MOHELA to learn about the Closed School Discharge application process.

Tax Implications if Your Loans are Discharged

Beginning January 1, 2021, discharges due to Closed School are not considered income by the Internal Revenue Service. Therefore, you will not have to pay federal income tax on your discharged loans.

The discharged loan amount may be considered income for state tax purposes. You may want to consult with your state tax office or a tax professional before you file your state tax return.

Additional Information

For further information, including a comprehensive Q&A about Closed School Discharges, visit the Office of Federal Student Aid website.